Question

Suppose you believe that stock XYZ will be less variable than the market expects in the near future. How would you use options to profit from this view? Please be specific.

Answer 1

If the XYZ Stock is less variable against the market expectations in the near future, the options can be used to profit in following form:

1) Purchase of the "Call options" because the stock is less variable and would be appreciating with its market price in the future. The "Call option" so purchase can be sold out in future to have gain.

2) Sell out of the "Sell options" because the stock is not expected to go down with its market price, so the sold out "Sell options" can be squared up to have gain.

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