At the end of the day, trading — and to a large extent investing — is about finding inefficiencies. When it comes to the typical buy-and-hold approach, the idea is that quality but overlooked enterprises will eventually rise to their true value. It’s much the same principle with options, where the relatively thinner volume may help facilitate favorable pricing inefficiencies.
One possible example of such an inefficiency is banking giant Citigroup (C). Prior to the end of last week, concerns existed about the stability of the U.S. and global economy. Investors nervously held their breath as financial behemoth JPMorgan Chase (JPM) got ready to disclose its third-quarter earnings report. Not surprisingly, implied volatility (IV) punched higher as the day approached.
