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11 Secrets of Naked Option Writing

Here's what you need to know before you get naked

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#4 – Select Stocks With Low Price Volatility

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While the option buyer always hunts and pecks for options on stocks that are extremely volatile, the option writer loves stocks that don’t move anywhere. He wants stocks that move slowly, and ones that move in a narrow range, because the option writer always has time working in his favor.

The slower a stock price moves, the more money he makes. Options with slow-moving underlying stocks will depreciate to zero before the stock ever reaches the bailout point.

Unfortunately, the stocks with the highest volatility maintain the highest and fattest premiums for option writing, and so the option writer must attempt to find options with low volatility, and correspondingly high premiums (time values) when possible.

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