Subject: Re: Check Capital Management BRK Options Stragegies
As a crude rule of thumb, if the one year volatility index is over 22, it's likely there is a useful opportunity for writing options. At 17, look elsewhere.
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Are you referring to a specific stock's implied volatility for a put/call one year out? Or the current value of VIX?


Neither, really---I was referring to the one year volatility index.
VIX is the one-month-forward index for the S&P 500 stocks.
There is a lesser known one-year-forward index that tells you how expensive longer term options are at the moment.
https://www.cboe.com/us/indice...
Using VIX as a guide will give pretty similar results, with different cutoffs, except in periods that something big expected to happen short term.
Since it is so concerned with the short term, it [over]reacts to short term news/noise a lot, and probably isn't representative of the pricing of the sorts of options one is most likely to write.

My intent was just to put a numeric gloss on the idea of considering option writing only when prices are generally good in the market.
You don't want to look at richly priced options on single stocks during a soft market for premiums (like writing insurance only for drunk drivers).
You want to look at options on good single stocks during a hard market. (insure the shy accountants with Camrys, during periods that everybody is asking high premiums even for them)


Jim