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Dr. Jim Schultz on the Best Trades When Volatility Is Too Low to Sell
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ticker lesson
Breakdown
0:00lesson
Low volatility strategies for premium sellers
- Low volatility strategies for premium sellers
- Long vertical spreads, calendar spreads, diagonal spreads
- Volatility high → favorable outcomes for premium sellers
- VIX at 15.5, volatility futures at 17.5
- Not prime pickings for selling premium now
1:39lesson
Volatility expansion and mean reversion
- Potential volatility expansion/mean reversion
- VIX at 15, could go lower to 10 or 8
- Long volatility strategies when VIX is low
- Three strategies: long vertical, calendar, diagonal spreads
3:31lesson
Sorting watch lists for low volatility
- Sort watch list by IB rank
- Implied volatility rank (IVR) metric
- Low volatility underlyings for strategies
- Defined risk strategies for beginners
5:19lesson
Defined risk strategies for beginners
- All strategies (vertical, calendar, diagonal) are defined risk
- Beginner traders should start with defined risk
- 3–6 months exposure to multiple market conditions
- Price of underlying irrelevant for defined risk
7:00lesson
Selecting stocks for low volatility strategies
- Any stock is open for business due to defined risk
- BAC at $52, SanDisk at $1,600 as examples
- Earnings season approaching with Bank of America
- Long vertical spread setup: straddle current stock price
8:37lesson
Directional bets with long vertical spreads
- Long vertical spread for directional bias
- Buy 50 call, sell 55 call for straddle
- Probability improved to 50/50
- Theta neutralized with short call offsetting long call
10:17lesson
Risk management in long vertical spreads
- Maximum loss known, potential gains limited
- Negative theta mitigated by short call
- Market conditions affect theta dynamically
- Low volatility environment for directional bets
12:08lesson
Maximizing probability and minimizing risk
- Improved probability from 40/60 to 50/50
- Maximum loss reduced with vertical spread
- Low volatility → directional shot opportunity
- Market conditions influence strategy outcomes
13:51lesson
Conclusion on low volatility strategies
- Long vertical spread as a low volatility strategy
- Take directional shot when volatility is low
- Strategies benefit from defined risk and market conditions
- Volatility expansion/mean reversion opportunities
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