Rules to Consider In Buying Naked Options

The following rules will help you put the odds in your favor when trading options:

• Buy those options that have at least a month left until they expire

• Lower implied volatility means the time premium is less, so generally the lower the implied volatility the better

• Buy options when you expect significant movement in the price of the underlying stock

• Buy those call options that have deltas of 50 or more and those put options with deltas of -50 or less