Option Buyer Will Get Killed In This Volatile Market

This is a warning to those people who are buying a call or a put in this all time high volatility environment. Most of the option especially put is price extremely high price. If you buy at such a high premium, most likely you will be selling at a low premium.

I have a student asking me … how come my put option is not making money even when the stock price falling off the cliff?? Well straight away i can only think of 2 possibilities which are TIME DECAY and IMPLIED VOLATILITY. The reason why my student is not making money is because he buy a front month contract and a put contract with high vega. So this mean that even if the stock price move toward his intended direction, he will not be making money as the time decay and implied volatility eat up all his profit.

Even gurus in CNBC say,”people who buy option is either an idiots or a fools without cover the long option”.

If you really want to buy options, please know the risk and do not be surprise if you are not making money …

Good Luck