tastytrade LIVE - September 17, 2019 - How Often Does IV Fall?


Manage episode 242301991 series 1436058
By tastytrade, Inc.. Discovered by Player FM and our community — copyright is owned by the publisher, not Player FM, and audio is streamed directly from their servers. Hit the Subscribe button to track updates in Player FM, or paste the feed URL into other podcast apps.
Implied volatility tends to be mean reverting over the long run. How much more do we earn as premium sellers when we sell premium and IV declines throughout the trade? ###Study * SPY, 45 DTE * 2005 - present * 16 delta strangles (16 delta put and 16 delta call) * Compared P/L when VIX on entry was higher to P/L when VIX on entry was lower * Observed how often VIX was higher or lower at expiration based on IVR We find that IV declines throughout the course of our trade 54% of the time, and we can use IV Rank to increase that percentage. A higher IV Rank, the better the chance that IV will decline and earn premium sellers more profits.

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