Quote from noob_trad3r:
Maybe I am confused, but if you sell an option with a higher IV, does that mean you are getting a better risk compensation?
Since an ITM or ATM option has a higher theoretical risk of assignment and the option being in the money or deeper in the money, why would the IV be lower?
VS an OTM put. thanks for your help.
Think of it this way. The ITM has already been ATM, and the ATM is more likely to stay there than an OTM. More people gamble on OTM, and floor traders run the price up...that's why we sell stuff, never buy stuff.
Don