Saturday, April 4, 2026 
Option Premium
Today as the market slipped I noticed that option premiums were not expanding much. However, I did notice that there were firmer bids for puts. In a contract where the size is normally 30 contracts bid by 30 ask, I saw the bid ask size edging upward to maybe 60 x 60 or 100 x 100. I did not see price appreciation. I saw firmer bids.
This is a good sign and a step in the right direction.
The next step will be wider spreads. I will start to see the ask on my puts move higher, but not the bid. At some point, the price pressure downward in the underlying will cause volatility in the name to hit a Tipping Point. If you have owned premium during times of extreme volatility, you know what happens after the tipping point. Volatility expands out so quick that all you have is wishful thinking and hindsight and would-a, should-a could-a’s in your head.
Unless you are positioned correctly.
It is then that you can hit it big.
the tipping point
Premium advice
Comment by Rusty Bloods — September 15, 2008 @ 8:36 pm
I meant super-premium advice!
Comment by Rusty Bloods — September 15, 2008 @ 8:36 pm
This is a test…
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Trackback by World Spark News — September 15, 2008 @ 8:38 pm
[...] With this knowledge of the underlying probabilities, I am now positioned to hit it big. When the tipping point in volatility hits in Gold, you are going to see calls in the yellow metal zoom out so fast [...]
Pingback by Read It In the Sunday Papers | Trade the Picture — December 1, 2008 @ 2:45 am
[...] the thing about Volatility. You have to be positioned before the tipping point hits. If you are positioned before it hits, it is then that you can hit it [...]
Pingback by The Credit Markets and the TED Spread | Trade the Picture — February 27, 2009 @ 2:39 pm
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