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>If I were to trade options, I would watch and trade the option price and
>not anything else. We know that the option price is affected by the
>following variables:
> Underlying security price
> Exercise or strike price
> Volatility
> Interest rates
> Dividend yield
> Time to expirations
>
>These variables fluctuate all the time between high and low. But the
>effect that they have on the option IS reflected in the price unless the
>market is not efficient which is another story.
>
>Volatility traders that trade the volatility have to use historical
>volatility as a guide. That is to say, that if volatility is at a high
>then expect it to go lower and SELL it etc.
No they do not. I don't use historical volatility as a guide. I use implied
volatility as my guide post. And implied volatility is not calculated from
historical volalilty.
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