WRITING TRADED OPTIONS for income

Hi Biffer & Bad, and all
I have developed quick way of evaluating the realative values of straddles:-
using a 12 month chart I calculate the average HV for the year split up into 12 separated segments and record the average:-
i.e...GLAXO (1258)--- average (60p)... monthly ups and downs with extreams ... two @ 160p, two @ 110p and one @ 90p.
I then check the ATM average monthly straddle prem (60p)
The short straddle here will give a profit spread of 120p (60p each side of 1250 strike) subtract a bit for protection (say BTO 1500 call (3.5p) and 900 put (3.5p). This leaves a net straddle credit of 53p, which opens a profit window that is comfortably higher than the average volatility…. a clear winner on eight, clear loser on two and about ‘break even’ on two.
My new measuring stick is that the monthly prem of a straddle is aprox equal to the average one month volatility. If the straddle premium is much lower (say 40p against an average monthly volatility of 60) then I'm not interested (this is s not good odds ....... and there aint many of these at the moment !!!!.

Strangles need a prem that is better than 75% of the average volatility.

To make this work well the sraddle needs to be sold when the stock is trading close to a strike. Sell strangles when the stock is trading roughly mid way between two strikes

A fairly crude instrument, but does come up with a reasonable way of making a comparison.

Best of luck in the new year ……….