In this low volatility environment, there is always volatility to be found somewhere. For option traders, that came in the form of $EFX in recent weeks.
In the wake of the massive data breach at the organization, the stock dropped as much as 37% in a very short space of time.
This saw implied volatility on the options of EFX soar to over 60%.
Source: ivolatility.com
Traders who were willing to bet the volatility would subside were rewarded very handsomely.
On September 15th, when EFX was trading at 92.98, traders could sell an October 20th $95 Strangle and receive $1,325 in options premium.
A few days later, on September 20th, EFX closed at $96 and the October $95 Strangle could be bought back for $960 for a profit of $365 in a very short space of time.
Short Strangles are an options trade that benefit from sideways movement of a stock. They involve naked options are and not suitable for all investors.
Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser.
