Our secret weapon for buying the right option.

Learning your way around implied volatility can actually be quick and painless... and could be very profitable for your portfolio. [Schaeffer's Logo]( Dear Trader, It's happened to the best of us at one time or another. You're all set to make a big purchase. Maybe it's a big-screen TV, a new refrigerator, or even plane tickets to a vacation getaway. You've done your due diligence, of course -- comparison shopped, looked for deals, and found what seemed like a good bargain. But somehow, when it comes time to pay, the final price still leaves you bug-eyed. Between taxes, "service fees," and other hidden costs, your "good deal" somehow turned into a serious case of sticker shock. And this same phenomenon can play out when you're trading options. A call or put contract that appears reasonably priced might turn out, when it's all said and done, to be a raw deal. Luckily, there's one easy tool you can use to [avoid overpaying for options](. No comparison shopping necessary -- just a quick check of one of our favorite indicators. [Don't overlook implied volatility!]( Stock pricing is a pretty straightforward endeavor. A company's share price is determined by the familiar forces of supply and demand in the market. When there's a strong bid for the shares, a stock's price will rise; when demand ebbs, the stock price declines. Options pricing involves a few additional moving parts. While the price of the underlying stock or asset is a major factor, an option's premium also accounts for variables such as the amount of time until expiration, interest rates, dividends -- and implied volatility. In the simplest terms, implied volatility (IV) refers to the degree of movement the market expects from the stock during the life span of the option contract. When traders are anticipating dramatic price action, IV will be high. If the shares are widely expected to remain subdued, IV will be low. For option buyers, high IV can spell trouble. When IV is inflated, option prices will also ramp up -- as will your cost of entry. In other words, the steeper the price you pay for IV, the more you need the underlying stock to move in order to profit. When a company has a known event on the horizon -- such as an earnings report or product launch -- IV will generally ramp up. These types of catalysts have been known to spark significant movements on the charts, so option buyers must generally pay a higher price to bet on the outcome of these events. And when you pay more upfront to play, it's that much more difficult to take part in the [big money-doubling and money-tripling wins]( that attracts traders to options in the first place. [Our "secret weapon" for sizing up option prices]( Based on our years of experience buying options, we've developed a proprietary indicator to determine when premiums are getting a little too rich. Our Schaeffer's Volatility Index (SVI) measures the individual IV levels of short-term, near-the-money calls and puts for all optionable stocks, and then averages the results into a single number. The resulting mean volatility reading is then placed in historical context by way of an annual percentile rank. A ranking of 50% means that short-term IV levels are exactly average, compared to the past year's worth of comparable readings for that stock. By this logic, an SVI reading in the 5th annual percentile means IV levels have been lower (and short-term options have been "cheaper," from a volatility standpoint) only 5% of the time during the last year. On the other end of the spectrum, an SVI in the 95th percentile indicates IV has rarely been higher (which correlates with abnormally pricey option premiums). Option buyers will want to gravitate toward situations where a stock's SVI ranks in the bottom half of its annual range (50% or lower). This signals that near-term IV levels are at or below the historical average for that particular stock, which suggests that options are pricing in entirely reasonable volatility expectations. When you refuse to overpay for options premiums, you keep your entry costs down, lower your breakeven point, and minimize your total dollars at risk. In short, this one simple trading metric can go a long way toward keeping [your options portfolio]( in the black. [Now that you're in a bargain-hunting mood...]( Are you ready to start seeking out deals on calls and puts? Schaeffer's Weekend Trader Alert issues a new trade every week, based on our proprietary Expectational Analysis® methodology. This approach targets stocks that are poised for big breakouts -- but with low-priced options. Every Sunday at 7 p.m. ET, you'll receive a new options recommendation from our expert team of traders. Each pick will be accompanied by an easy-to-follow commentary where we'll explain exactly why we think the stock is poised for a major move over the coming months -- and we'll include all the key stats you need to know on implied volatility and options pricing, too. And you'll never have to worry about the details, because we provide everything you need to manage the trade, including a target profit and time-stop date. You're never left wondering what to do -- we'll guide you every step of the way. As a special "thank you" for choosing to [begin your options journey with Schaeffer's]( we're offering a special deal on Weekend Trader Alert for today only. You can take advantage of our powerful full-service recommendations at a serious discount to our usual prices! Typically, we price Weekend Trader Alert at $149 per month, which takes into account the volume of trades and the ambitious target profits of each recommendation. But through this exclusive welcome offer, you can claim a full month of these exciting trades for just $10! I'm positive that once you see the power of options, you'll be hooked... [So act now to claim an average of 4 of our subscriber-favorite trades for just $10!]( [Act Now!]( But like I said, this is the final day to claim your place as a Weekend Trader Alert member, so don't delay! [Click here to secure your spot]( and get ready to receive your first trade this Sunday at 7 p.m. ET! All my best, Bernie Schaeffer Chairman & CEO Schaeffer's Investment Research service@sir-inc.com []( 1-800-448-2080 1-513-589-3800 International P.S. This is your chance to take advantage of our secret weapon for finding the best option-buying opportunities in the market. [Click here to join today!]( 5151 Pfeiffer Rd Cincinnati, OH 45242 If you didn't create an account using this email address, please ignore this email or [unsubscribe](. To ensure delivery of this email to your inbox and to enable images to load in future mailings, please add enews@schaeffer.com to your e-mail address book or safe senders list. Although there is significant profit potential associated with buying options, there is also the risk of losing one's entire investment in any individual trade. In any option buying approach, it is expected that losing trades will be more numerous than winning trades. The goal is for the average gain to be significantly greater than the average loss so that the bottom line is profitable. Prior to purchase, ensure that you have a broker that allows the trading of options and that you are approved to trade options.