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JD and Silas are diving deep today into what July seasonality means for both the equity and commodity markets. Join them live today to see exactly how they are positioning their trades to capitalize on these seasonal shifts [tap to join them for Opening Playbook]
You know what most traders get totally wrong?
They think high volatility is a problem.
They see expensive options and think, “Ugh, everything’s too pricey. Guess I’ll sit this one out.”
But when options are overpriced relative to how much a stock actually moves, that’s not a problem. That’s an opportunity.
This all comes back to one simple idea: Premium is the market’s price tag on the move it expects.
You’ll often hear this called the expected move or the market maker move. And when that expected move is out of sync with what the stock normally delivers, that gap is where your edge lives.
Before we get deeper into the setups, there’s one thing traders consistently misinterpret — what volatility really means.
A lot of people look at something like the Cboe Volatility Index (VIX) and assume it tells them how the market is moving. It doesn’t. It does not measure movement. It measures the pricing of expected movement.
That difference is massive, and once you understand it, premium-based trading starts to click.
2 Ways to Use Premium to Your Advantage
There are three structures I rely on when options are overpriced, but we’re going to focus on two of them here: defensive debit spreads and iron condors.
Let’s start with my favorite — the defensive debit spread with a line in the sand below price. This is where you still have a bullish bias, but because there’s extra premium baked in, you get a big cushion.
Even if you’re wrong or the stock stalls, that cushion absorbs the lack of movement. So if your directional call doesn’t pan out, you’re not automatically toast.
The next tool is the iron condor. This creates a profit zone between two price levels. Imagine a stock where the options market is pricing in an $8 move, but historically, the stock only moves $4. That tells you something important — the options are overpriced compared to the real move.
With overpriced options, your range becomes incredibly forgiving. If the market is pricing in a huge swing and the stock usually barely budges, the stock is highly likely to stay right inside your profit zone.
Once you start comparing expected move to actual move, you’ll immediately see where the mispricings are.
It’s as simple as looking at what the options imply versus what the stock usually delivers. If the numbers don’t line up, there’s your signal.
How to Spot These Opportunities Fast
You don’t need to overcomplicate this.
Almost every trading platform shows the expected move for the expiration you’re focused on. That number tells you what the market believes the stock will move by a specific date.
From there, all you do is compare it to the stock’s normal behavior. Pull up the last several equivalent periods — daily, weekly, monthly — and see how much the stock usually moves.
If the expected move is consistently higher, overpriced premium is giving you an edge. If it’s consistently lower, the options may be underpricing the real movement.
This quick check alone can completely change the way you structure trades. Instead of guessing direction, you’re analyzing the relationship between expectation and reality.
And that’s where the real power is — trading the difference between what the market prices in and what actually happens.
So the next time you see expensive options and think the market is too hot to touch, flip your perspective.
That premium isn’t a barrier. It’s a buffer. And if you structure your trades the right way, it can be the difference between guessing right and actually making money.
Now don’t forget to join us at 10 a.m. ET weekdays for Opening Playbook, and at 3:30 p.m. ET Closing Playbook!
Nate Tucci
Tucci Trades
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.Â
