More volatility more profit?

innovest_11 · Nov 14, 2007

For me, as swing trader, i don't seems to do well if there's too much volatility without any clear direction.

So i do not know why people make money from volatility... anyone care to explain, thanks

Because if it is so volatile and choppy, not possible, unless u r day trader, but day trader earn peanuts

Batman28 · Nov 14, 2007

some traders I know at banks trade variance swaps or volatility derivatives.. they can go long or short on volatility.. so if they expect volatility to be high and some variance they will make money - so they love volatility.

volatility arb is also something that I've notice grow rapidly recently..

Hook N. Sinker · Nov 14, 2007

Quote from innovest_11:

So i do not know why people make money from volatility... anyone care to explain, thanks

Some theoretical option pricing models contain a volatility component. Since volatility can vary it is possible to sell options when volatility values are high and buy options when volatility values are low. Volatility can not be less than zero.

I recall reading about the use of straddles for volatility trading but I am the wrong guy to ask about options. Maybe the options traders could name some option strategies used for volatility trading.

Cache Landing · Nov 14, 2007

Quote from innovest_11:

For me, as swing trader, i don't seems to do well if there's too much volatility without any clear direction.

So i do not know why people make money from volatility... anyone care to explain, thanks

Because if it is so volatile and choppy, not possible, unless u r day trader, but day trader earn peanuts

Be careful on your blanket statements about day traders making peanuts. I swing traded from 2003 through last year. This year it became better for day trading and so far I am making much more day trading than I was swing trading. Swing trading is difficult in choppy markets. We are starting to enter day trader's paradise again.

BTW, I should note that I trade mainly options for both swing and day trading.

Cache Landing · Nov 14, 2007

Quote from Hook N. Sinker:

I recall reading about the use of straddles for volatility trading but I am the wrong guy to ask about options. Maybe the options traders could name some option strategies used for volatility trading.

Daytrading volatility with options is almost impossible. Swing trading vol with options can be very rewarding during wild times like these.

matador04 · Nov 14, 2007

Quote from Cache Landing:

Be careful on your blanket statements about day traders making peanuts. I swing traded from 2003 through last year. This year it became better for day trading and so far I am making much more day trading than I was swing trading. Swing trading is difficult in choppy markets. We are starting to enter day trader's paradise again.

BTW, I should note that I trade mainly options for both swing and day trading.

Day trade options? deep ITM?

Cocaine · Nov 14, 2007

Would you care to define "peanuts"?

Quote from innovest_11:

Because if it is so volatile and choppy, not possible, unless u r day trader, but day trader earn peanuts

gnome · Nov 14, 2007

Quote from innovest_11:

For me, as swing trader, i don't seems to do well if there's too much volatility without any clear direction.

So i do not know why people make money from volatility... anyone care to explain, thanks

Because if it is so volatile and choppy, not possible, unless u r day trader, but day trader earn peanuts

Volatility = "lots of points covered", both up and down.

I've had days where I made 40+ points where the markets ended up little changed.

I've also had high volatility days where I ended up looking like I crawled through a wood chipper.

Just because volatility provides greater opportunity does not mean you will be on the right side of it.

CaliforniaKid23 · Nov 14, 2007

i don't see why anyone would be swing trading this week, when there is a lot of uncertainty and fear. its either day trading or protecting your capital during extreme volatility.