Part 5/7:
It’s important to remember that high implied volatility often correlates with risks due to potential price swings in the underlying stock. Thus, while it may be tempting to sell options merely based on high premiums, doing so without adequate research could prove detrimental to your investment.
Example: Stocks with High Implied Volatility
Consider a hypothetical scenario where a trader investigates Rumble, a stock that has surged by nearly 34% in one day. Such a movement often indicates heightened implied volatility. If the trader decides to sell a cash-secured put option at a strike price of $16.50, they might see a premium as high as $190 for a collateral investment of $1,650. This reflects an attractive return of over 10% in just one week.