Market comments 20221205

I was quite happy to see the market being down today given the huge rally on Thursday last week.

This move just helped my portfolio to be a bit more balanced.

What options traders do need to be careful of is the possibility of a volatility expansion.

Option prices are higher when the volatility is high because the perceived risk of larger swings is higher. So when we have positions in low volatility environment then the risk of a volatility expansion is high.

For those, who are new to my daily market comments, I place and document one trade a day with the objective of helping everyone learn how to trade options.

What's my trade for today?

#SQ (#Block) January $50 put. I just closed my December strangle for a nice profit, which opened the doors for another trade. The stock dropped a fair bit today so selling a put option sounded like a logical move.

The stats

Trade Type: Short Put

Strike: $50

Expiry: 20 Jan

Delta: 16

IV Rank: 29.6

Premium: $1.54

Cap Req: $502

Annualised Prof at Expiry: 243%

IMPORTANT: Studying previous trades provide the opportunity to everyone to learn a great deal so I encourage you to click on the links below and digest the info.

Closed:

https://www.tycoonitos.com/community/market-comments/market-comments-20221103

https://www.tycoonitos.com/community/market-comments/market-comments-20221128

Let me know what you think.