Dancing on the Fear Spike

When volatility is up and rising in markets, would you rather be a buyer or seller of option premium? Actually, you if you are a momentum player you'd rather be a buyer, especially when markets are trending up or down. Contrarily, you might want to hedge when options are cheap when volatility is flat and low. But when are the best conditions to be a seller of premium?

I have found the best time to do this is on a spike high in volatility that is far outside the norm. Often we find these extreme moves are exaggerated and reflect emotional responses to uncertainty and an unclear future. It's always better to be safe than sorry -- to buy insurance and get ready for "the big flood" that usually never happens. No one would want to lose the strong gains we've seen so far this year. Who would wish to be the last one in the room before the lights go out?...318 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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