Option strategy to deal with up market with IV dropping
- Thread starter thirst
- Start date
I disagree. Implied volatility is not particularly high at all. It's not even at its 200d MA.
Point taken. But if the market does settle down, and starts to retrace some of this carnage, could one anticipate that the Vix and IV would drop during the bounce? And if so, buying calls would have to deal with both the theta decay and IV retracement.
The 25 Delta IV on SPY calls was at 12.5 at the beginning of July and now at almost 19.37%. If SPY does bounce, one might expect the IV to drop back down somewhat?
The 25 Delta IV on SPY calls was at 12.5 at the beginning of July and now at almost 19.37%. If SPY does bounce, one might expect the IV to drop back down somewhat?
I don't disagree at all that IV could drop in half over the next few months.
But it could also just as easily quadruple.
Personally have nothing against taking risks
just like to understand the extent of the worst case downside.
But it could also just as easily quadruple.
Personally have nothing against taking risks
just like to understand the extent of the worst case downside.try spreads, either bull call (buy 1255 spx call/sell 1275 call) or bull put (sell spx 1255 put/buy 1235 put)
If you are really sure the market has found a bottom and will be coming up (which I am not too sure of) then why not buy a call spread and finance the cost of theta with a short call spread in VIX. Obviously if you are wrong it would be a double whammy but a slow leak down wouldn't hurt the short call spread in VIX as much.