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Explore Your Options  |  FEB 2011

Explore Your Options by Tom Gentile

A CaLL on VoLatiLitY I’m new to options and having some difficulty. Despite the broader market having more or less trended higher since September 2010, I’ve found my purchased calls, which I make sure aren’t expensive in their relative historical and implied pricing, are nonetheless resulting in net losses. Any insight into what I might be doing wrong would be appreciated. First of all, I’m pleased to see you’re learning about the mechanics of option pricing with regards to the influences of volatility. The bad news is when you’re buying an option cheap with no other hedge, that trading edge can be quick to disintegrate as the purchased option’s greeks begin to influence the pricing.

by Tom Gentile

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