By most measures, it appears we are about to enter one of the most "uncertain" times in recent memory. Yet VIX/Option Premiums are near multi year lows...
Everyday we have a new tweet about a tariff (at some point the market needs to take this seriously). Plus we have major instability in Europe brewing...
One tweet could cause a massive world wide panic sending the markets plunging... seems the next 4-8 years I would expect volatility/option premium to be high, but the market hasn't caught up.. what am I overlooking?
Don't get me wrong, I am fine with the low prices, I think being a buyer of options right now might be a great play as you look 3 to 6 months out. Especially buying ratio straddles (3 long straddles 6 months out short 2 straddle/strangles 2 to 3 weeks out) to finance the long straddles.. Just trying to figure out what I am missing..
(IMO) You aren't missing a thing.
As noted earlier, August 2015 had us sliding up the "Wall Of Worry" with seemingly no actual worries[!]..... and everyone similarly scratching their heads. At least, I was scratching mine. I was scratching mine so much that, upon embarking on an impromptu vacation -- high into mountains where cell reception would be but a dream -- I exited all bottom-side positions. Cost a couple of dollars, but ... down-side surprises are rarely announced, and we'd seemed primed for one...... So the hit was taken, and off I went.
Upon returning to the edge of civilization (marked unimaginatively by gaining cell reception), I idly tuned in Investing.com, and my jaw dropped, at the *beginning* of what would last for another 72?? hours. China had messed with the yuan. WOW.
I smell the same thing going on now. I am letting a lot of inventory expire or be zeroed-out margin-wise, in preparation for some sweet, sweet vol pop. I am seeking to be poised and ready. Before the BREXIT vote, before the FED meeting and the election, I saw massive changes week-to-week in option premium. I don't see that now. Scary.
FWIW, rather than selling verticals, go with broken-wing butterflies, with short delta between |.20| and |.25|. By owning that front strike, you will vastly reduce your vol exposure, and eventually, even turn it positive.