Even though I remain bullish on the market, buying puts, put spreads or diagonals (which can be spanned out in time) is a good way to profit from temporary declines. At present in First Solar, Inc.(NASDAQ:FSLR), momentum indicators are way overbought, sentiment is at highest in 12 months and implied volatility has dropped to 35% ( well below its 12 month average). Many traders do not like debit put spreads or diagonals because they involve a debit from ones account but in periods of low volatility, selling options is not an attractive strategy. Furthermore when volatility is cheap, buying put options are less expensive plus they have infinite profit potential not like when selling a spread instead of buying one.
Overbought
Volatility On The Floor
Sentiment At Annual Highs