The new option secret Volatility Book Notes

Option volatility is one of the most important characteristics. We look for benefits such as purchasing
undervalued options (low volatility), selling overvalued options (high option volatility), combining under
and overvalued options in spreads, and using the time decay and limited risk aspects of options.

No option is considered for purchase or sale unless the current volatility is compared to past levels as
well as levels of other strike prices of the same option series. We search for anything that can give us an
“edge” in trading, such as significantly higher volatility than normal, significantly lower volatility than
normal, or a combination of the above in the same option series providing a disparity in option
pricing.

Volatility can also differ significantly within a market during the same time. In silver, for example, during
big market moves, volatility for the out-of-the-money options can be 200% higher than the at-the-
money options. This occurs often in the grain markets during periods of potential crop problems in the
summer months. Teaching you to know when to expect and how to use these opportunities to your
advantage is our goal in The Option Secret