Credit-based options strategies such as the bull put spread are powerful, but they can also be incredibly risky if you’re entering the arena in a haphazard way. Case in point is Walgreens Boots Alliance (WBA). As an interesting but wildly volatile security, WBA stock is not for the faint of heart. That said, the underlying implied volatility (IV) relative to its historical volatility (HV) will almost certainly tempt retail options traders.
Just as a quick refresher, IV represents the anticipation of market movement. Therefore, when the metric is significantly above HV, it indicates an expectation of far greater kinesis than normal situations for the asset would engender. Put another way, the premium for selling options is much greater, which can be a useful indicator — so long as you select the right trade.
