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Ed a few more questions. Do you only pay attention to implied volatility (IV)? I have been doing some reading and do you take into account historical volatility? Do you just calculate IV from the black scholes model, or do you use the CBOE calcualtor. One of the inputs it wanted was IV, which that was the only one I had no idea how to go about determining...

I am learning the reason to pay attention to IV is that will determine how the option moves in alongside the underlying. There are situations where the underlying can rise while the related call option may fall. This is due (I gather) largely to implied and historical volatility.

This is an excerpt from some of my options reading...

Whilst implied volatility -- the volatility of the option implied by current market prices -- is commonly used the argument that this is the "best" estimate is somewhat circular. Skilled options traders will not rely solely on implied volatility but will look behind the estimates to see whether or not they are higher or lower than you would expect from historical and current volatilities, and hence whether options are more expensive or cheaper than perhaps they should be.

It's a slight over simplification, but basically implied volatility will give you the price of an option; historical volatility will give you an indication of its value. It's important to understand both.


So my question is am I making this too complex, or how far in depth do you analyze volatility before selling a covered call..?

Thanks,
Taylor
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