Options strategies for low iv

Are you trading options in the right environment?
TATAMOTORS IV(60) is at 23.73 is low & IV(180) is at 12.80 is very much low in this case what should we do either we buy JAN Month call put .
can you please through some more light with some practical or Live exmaple so that we could more easily understand this topic.
just for eductional purpose.
thanks in advance.
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Implied Volatility: Buy Low and Sell High.
In the financial markets, options are rapidly becoming a widely accepted and popular investing method. Whether they are used to insure a portfolio, generate income or leverage stock price movements, they provide advantages other financial instruments don't.
Aside from all the advantages, the most complicated aspect of options is learning their pricing method. Don't get discouraged – there are several theoretical pricing models and option calculators that can help you get a feel for how these prices are derived. Read on to uncover these helpful tools.
What Is Implied Volatility?
It is not uncommon for investors to be reluctant about using options because there are several variables that influence an option's premium. Don't let yourself become one of these people. As interest in options continues to grow and the market becomes increasingly volatile, this will dramatically affect the pricing of options and, in turn, affect the possibilities and pitfalls that can occur when trading them.
Implied volatility is an essential ingredient to the option pricing equation. To better understand implied volatility and how it drives the price of options, let's go over the basics of options pricing.
Option Pricing Basics.
Option premiums are manufactured from two main ingredients: intrinsic value and time value. Intrinsic value is an option's inherent value, or an option's equity. If you own a $50 call option on a stock that is trading at $60, this means that you can buy the stock at the $50 strike price and immediately sell it in the market for $60. The intrinsic value or equity of this option is $10 ($60 - $50 = $10). The only factor that influences an option's intrinsic value is the underlying stock's price versus the difference of the option's strike price. No other factor can influence an option's intrinsic value.
Using the same example, let's say this option is priced at $14. This means the option premium is priced at $4 more than its intrinsic value. This is where time value comes into play.
Time value is the additional premium that is priced into an option, which represents the amount of time left until expiration. The price of time is influenced by various factors, such as time until expiration, stock price, strike price and interest rates, but none of these is as significant as implied volatility.
[ Learn the details of intrinsic value and time value through simple graphics and easy to follow calculations in Investopedia Academy's Options for Beginners course. ]
Implied volatility represents the expected volatility of a stock over the life of the option. As expectations change, option premiums react appropriately. Implied volatility is directly influenced by the supply and demand of the underlying options and by the market's expectation of the share price's direction. As expectations rise, or as the demand for an option increases, implied volatility will rise. Options that have high levels of implied volatility will result in high-priced option premiums. Conversely, as the market's expectations decrease, or demand for an option diminishes, implied volatility will decrease. Options containing lower levels of implied volatility will result in cheaper option prices. This is important because the rise and fall of implied volatility will determine how expensive or cheap time value is to the option.
How Implied Volatility Affects Options.
The success of an options trade can be significantly enhanced by being on the right side of implied volatility changes. For example, if you own options when implied volatility increases, the price of these options climbs higher. A change in implied volatility for the worse can create losses, however, even when you are right about the stock's direction.
Each listed option has a unique sensitivity to implied volatility changes. For example, short-dated options will be less sensitive to implied volatility, while long-dated options will be more sensitive. This is based on the fact that long-dated options have more time value priced into them, while short-dated options have less.
Also consider that each strike price will respond differently to implied volatility changes. Options with strike prices that are near the money are most sensitive to implied volatility changes, while options that are further in the money or out of the money will be less sensitive to implied volatility changes. An option's sensitivity to implied volatility changes can be determined by Vega – an option Greek. Keep in mind that as the stock's price fluctuates and as the time until expiration passes, Vega values increase or decrease, depending on these changes. This means that an option can become more or less sensitive to implied volatility changes.
How to Use Implied Volatility to Your Advantage.
One effective way to analyze implied volatility is to examine a chart. Many charting platforms provide ways to chart an underlying option's average implied volatility, in which multiple implied volatility values are tallied up and averaged together. For example, the volatility index (VIX) is calculated in a similar fashion. Implied volatility values of near-dated, near-the-money S&P 500 Index options are averaged to determine the VIX's value. The same can be accomplished on any stock that offers options.
Figure 1 shows that implied volatility fluctuates the same way prices do. Implied volatility is expressed in percentage terms and is relative to the underlying stock and how volatile it is. For example, General Electric stock will have lower volatility values than Apple Computer because Apple's stock is much more volatile than General Electric's. Apple's volatility range will be much higher than GE's. What might be considered a low percentage value for AAPL might be considered relatively high for GE.
Because each stock has a unique implied volatility range, these values should not be compared to another stock's volatility range. Implied volatility should be analyzed on a relative basis. In other words, after you have determined the implied volatility range for the option you are trading, you will not want to compare it against another. What is considered a relatively high value for one company might be considered low for another.
Figure 2 is an example of how to determine a relative implied volatility range. Look at the peaks to determine when implied volatility is relatively high, and examine the troughs to conclude when implied volatility is relatively low. By doing this, you determine when the underlying options are relatively cheap or expensive. If you can see where the relative highs are (highlighted in red), you might forecast a future drop in implied volatility, or at least a reversion to the mean. Conversely, if you determine where implied volatility is relatively low, you might forecast a possible rise in implied volatility or a reversion to its mean.
Implied volatility, like everything else, moves in cycles. High volatility periods are followed by low volatility periods, and vice versa. Using relative implied volatility ranges, combined with forecasting techniques, helps investors select the best possible trade. When determining a suitable strategy, these concepts are critical in finding a high probability of success, helping you maximize returns and minimize risk.
Using Implied Volatility to Determine Strategy.
You've probably heard that you should buy undervalued options and sell overvalued options. While this process is not as easy as it sounds, it is a great methodology to follow when selecting an appropriate option strategy. Your ability to properly evaluate and forecast implied volatility will make the process of buying cheap options and selling expensive options that much easier.
When forecasting implied volatility, there are four things to consider:
1. Make sure you can determine whether implied volatility is high or low and whether it is rising or falling. Remember, as implied volatility increases, option premiums become more expensive. As implied volatility decreases, options become less expensive. As implied volatility reaches extreme highs or lows, it is likely to revert back to its mean.
2. If you come across options that yield expensive premiums due to high implied volatility, understand that there is a reason for this. Check the news to see what caused such high company expectations and high demand for the options. It is not uncommon to see implied volatility plateau ahead of earnings announcements, merger and acquisition rumors, product approvals and other news events. Because this is when a lot of price movement takes place, the demand to participate in such events will drive option prices higher. Keep in mind that after the market-anticipated event occurs, implied volatility will collapse and revert back to its mean.
3. When you see options trading with high implied volatility levels, consider selling strategies. As option premiums become relatively expensive, they are less attractive to purchase and more desirable to sell. Such strategies include covered calls, naked puts, short straddles and credit spreads. By contrast, there will be times when you discover relatively cheap options, such as when implied volatility is trading at or near relative to historical lows. Many option investors use this opportunity to purchase long-dated options and look to hold them through a forecasted volatility increase.
4. When you discover options that are trading with low implied volatility levels, consider buying strategies. With relatively cheap time premiums, options are more attractive to purchase and less desirable to sell. Such strategies include buying calls, puts, long straddles and debit spreads.
The Bottom Line.
In the process of selecting strategies, expiration months or strike price, you should gauge the impact that implied volatility has on these trading decisions to make better choices. You should also make use of a few simple volatility forecasting concepts. This knowledge can help you avoid buying overpriced options and avoid selling underpriced ones.

3 Option Strategies To Use During Low Volatility Markets.
February 7, 2014.
Low volatility trading is tough for option sellers like us.
When markets are calm premiums are small and narrow - meaning that we cannot sell options far from the current stock price.
So what's a trader to do!?
Staying active, and keeping position size small, is important but you don't want to force trades into the market that aren't right.
Here are three options strategies you can use during these low volatility times:
1) Put/Call Debit Spreads.
Make some directional bets on overbought or oversold stocks. Using debit spreads, you'll pay to enter the strategy and will look to pay about 50% of the width of the strikes.
This shouldn't be a big position (when should it ever) and you should try to have some plays on both sides.
The idea here is to keep active and close the trade out early when it shows a profit.
Start The FREE Course on “Earnings Trades” Today: When companies announce earnings each quarter we get a one-time volatility crush. And while most traders try to profit from a big move in either direction, you'll learn why selling options short-term is the best way to go. Click here to view all 10 lessons ?
2) Ratio Spreads.
If your directional assumption is extremely strong, you can use a ratio spread.
The spread P&L diagram below is for a call back spread where you sell 1 call and then buy 2 calls at a higher strike.
Since you are long 2x more options then you are short you'll be happy to see an increase in volatility. But remember that it's a big directional assumption (much more so than the debts spreads above).
3) Put/Call Calendars.
Calendars are great for low volatility markets! You have to be a little careful on your direction and I suggest using put calendars more than call calendars because volatility usually rises as markets fall.
Here you'll sell the front month option and buy the back month option taking advantage of the time decay and a possible rise in volatility.
Another tip is to make sure that the front month option has enough premium to make it worth the trade. Don't sell a front month option with .10 or .20 of value - it's just not work the investment.
About The Author.
Kirk Du Plessis.
Kirk founded Option Alpha in early 2007 and currently serves as the Head Trader. Formerly an Investment Banker in the Mergers and Acquisitions Group for Deutsche Bank in New York and REIT Analyst for BB&T Capital Markets in Washington D. C., he’s a Full-time Options Trader and Real Estate Investor.
He’s been interviewed on dozens of investing websites/podcasts and he’s been seen in Barron’s Magazine, SmartMoney, and various other financial publications. Kirk currently lives in Pennsylvania (USA) with his beautiful wife and two daughters.
Enjoyed your article! Good tips for a low-volatility environment. I like using the debit spreads personally. Also, I believe you meant to say “worth”, not “work” in the last sentence on Put/Call Calendars.
Thanks Matthew! Yes I did mean to say that haha – typing way to fast.

Ultimate Strategy Guide.
Most options traders try to fit 1 or 2 of their favorite strategies into every stock they analyze. But we both know that you can't force a square peg into a round hole. Instead, you need help finding the best options strategy for the exact market setup you're looking at right now.
Choosing which option strategy to use for a trade is a process of elimination, not selection. There are good and bad strategies for each market condition – and now can quickly and easily find the right strategy for the right market. Plus, we'll give you some "best practices" for entering each strategy.
Step #1 Market Assumption.
The first step to finding the right strategy is to figure out what your market assumption of the stock is; are you bullish, bearish, or neutral?
Step #2 Implied Volatility.
The next step is to find the current level of IV and determine the current IV rank percentile. Is volatility above or below the 50th percentile?
Step #3 Choose Strategy.
The final step is to choose a strategy from the grid below that fits that particular stock situation and your personal portfolio. Easy peasy right?!
If your directional assumption is bullish on the stock's direction and. . .
High IV Rank.
Example : Sell 1 put; buy 1 put at lower strike.
Increase in Volatility : Helps or hurts depending on strikes chosen.
Time Erosion : Helps or hurts depending on strikes chosen.
BEP : Short put strike minus net credit.
Increase in Volatility : Hurts position.
Time Erosion : Helps position.
BEP : Strike price minus credit received.
Example : Buy 1 call; sell 2 calls at next higher strike; buy 1 call at next higher strike (can skip strike for BWB)
Increase in Volatility : Typically hurts position.
Time Erosion : Typically helps position.
1. Lower long call strike plus net debit paid.
2. Higher long call strike minus net debit paid.
Low IV Rank.
Example : Buy 1 call; sell 1 call at higher strike.
Increase in Volatility : Helps or hurts depending on strikes chosen.
Time Erosion : Helps or hurts depending on strikes chosen.
BEP : Long call strike plus net premium paid.
Example : Sell 1 near-term call; buy 1 long-term call same strike.
Increase in Volatility : Helps position.
Time Erosion : Typically helps position.
BEP : Varies depending on strikes.
Example : Sell 1 call; buy 2 calls at higher strike.
Increase in Volatility : Typically helps position.
Time Erosion : Typically hurts position.
1. Short call strike plus net credit received.
2. Long call strike plus [(the difference between the long call strike and short call strike) minus credit received]
If your directional assumption is neutral on the stock's direction and. . .
High IV Rank.
Example : Sell 1 call; sell 1 put at same strike.
Increase in Volatility : Hurts position.
Time Erosion : Helps position.
1. Call strike plus net credit received.
2. Put strike minus net credit received.
Example : Sell 1 call; buy 1 call at higher strike; sell 1 put; buy 1 put at lower strike.
Increase in Volatility : Helps or hurts depending on strikes chosen.
Time Erosion : Helps or hurts depending on strikes chosen.
1. Short call strike minus net credit received.
2. Short put strike plus net credit received.
Example : Sell 1 call; sell 1 put at strikes equal from current price.
Increase in Volatility : Hurts position.
Time Erosion : Helps position.
1. Call strike plus net credit received.
2. Put strike minus net credit received.
Sometimes the best trade is NO trade at all. If IV is low and you are neutral on the stock then your best option is to "pass" on this trade and move onto another trade.
If your directional assumption is bearish on the stock's direction and. . .
High IV Rank.
Example : Sell 1 call; buy 1 call at higher strike.
Increase in Volatility : Helps or hurts depending on strikes chosen.
Time Erosion : Helps or hurts depending on strikes chosen.
BEP : Short call strike plus net credit.
Increase in Volatility : Hurts position.
Time Erosion : Helps position.
BEP : Strike price plus credit received.
Example : Buy 1 put; sell 2 puts at next lower strike; buy 1 put at next lower strike (can skip strike for BWB)
Increase in Volatility : Typically hurts position.
Time Erosion : Typically helps position.
1. Higher long put strike minus net debit paid.
2. Lower long put strike plus net debit paid.
Low IV Rank.
Example : Buy 1 put; sell 1 put at lower strike.
Increase in Volatility : Helps or hurts depending on strikes chosen.
Time Erosion : Helps or hurts depending on strikes chosen.
BEP : Long put strike minus net premium paid.
Example : Sell 1 near-term put; buy 1 long-term put same strike.
Increase in Volatility : Helps position.
Time Erosion : Typically helps position.
BEP : Varies depending on strikes.
Example : Sell 1 put; buy 2 puts at lower strike.
Reward : Limited, but substantial.
Increase in Volatility : Typically helps position.
Time Erosion : Typically hurts position.
1. Short put strike minus premium received.
2. Long put strike minus [(difference between long put strike and short put strike) minus credit received]
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