Tastylive: Stay Profitable During Low Volatility with This Strategy

Traders need markets to move to have profitable trades. Using tools such as options can take a smaller market swing and turn it into a profitable trade.

However, one component of option pricing is related to market volatility. With market volatility at four-year lows, that makes it more challenging for investors to profit. With the right tools and strategies, however, traders can still make reasonable profits while waiting for higher-volatility ones.

Less volatility means fewer opportunities, especially for directional bets. Buying a call option ahead of a stock’s surge higher is a great way to leverage a return. However, when volatility is low, stocks are less likely to soar like that.

Stocks are also unlikely to see a big dive. That means just buying a put option can also struggle in a low-volatility environment.

One strategy to make money in such an environment is with a strangle. This is a trade that uses multiple options. And it can benefit from the underlying stock staying within a certain range.

Even if a stock breaks out of its range, one part of the option trade will still show a profit. That helps reduce the total possible loss.

The strategy can also be used for a market index as a whole. That’s also where zero-day options can be used to book profits on a regular basis.

To look at the best way to profit while trading in a low-volatility environment, click here.