In a short volatility strategy, what is the primary objective when selling options?

In a short volatility strategy, the primary objective when selling options is to keep the premium if the option expires out-of-the-money. This strategy involves writing options, which means the trader receives a premium upfront. The expectation is that the options sold will not be exercised, allowing the trader to retain this premium as profit.

When options are sold, they have a defined expiration date. If the underlying asset does not move in a way that would make the option profitable for the buyer—specifically, if the option expires out-of-the-money—the seller benefits by keeping the premium received from selling the option. This strategy aims to capitalize on the time decay of options, where the value of the option decreases as it approaches expiration, particularly if the market does not experience significant volatility.

The other choices reflect objectives that are not central to a short volatility strategy. For example, while acquiring new stocks may be a goal in different investment contexts, it is not a fundamental aspect of selling options in this strategy. Eliminating risk and guaranteeing profits from increasing volatility contradict the very nature of short volatility strategies, which involve taking on risk in anticipation of maintaining a stable market environment.