High IV Strategies

[Optrader 128]

I am starting this thread to share my thoughts on high IV trading and strategies. Currently there are no strategies and I could not find one other than the SO straddles/stranges/calendars.

Trading in low IV environment when VIX < 20 is no brainer. There are plethora of choices . Straddles/Strangles/Calendars.

But when it comes to VIX > 30 like now, there is lot of risk In trading those straddles/strangles/calendars. 

1. If you choose straddle and market rallies which often happen in bear market, IV collapses. If your chosen stock does not move, you will suffer from no movement and IV collapse.

2 . Calendars will shrink as IV collapses and stock's rallies.

3. Iron condors as usual are dangerous both in low IV and high IV . Risk is  IV may not collapse , what if it doubles like covid/financial meltdown .

4. VXX / VIX have their own issues. Like  if you go short VXX and it turns out to be another covid. Well sleepless nights and losses. Nobody should short that VXX / VIX  though it is the most profitable trade. I myself made lot of money last year + first few months till VXX fund froze. But never liked it as it causes heart burns.

I am trying to structure a trade  which could benefit if IV keeps rising and stocks move down  OR  IV collapses and stock rallies.

What comes to mind is    a  OTM put calendar + OTM call butterfly.  It could be earnings calendar + earnings butterfly as only those provide low risk setups.

I have personally never traded this but going to give it a spin.   Any other ideas / thoughts  ?

 

[Yowster 9,174]

2 hours ago, Optrader said:

I am trying to structure a trade  which could benefit if IV keeps rising and stocks move down  OR  IV collapses and stock rallies.

What comes to mind is    a  OTM put calendar + OTM call butterfly.  It could be earnings calendar + earnings butterfly as only those provide low risk setups.

Actually, this is very similar to the hedged flys that we have used from time to time, and is based on the same IV scenarios you mentioned.

[Optrader 128]

Thanks  for the vote

Now might be little late for doing this

vix is too high and once FED announces rates it will come down 

may be i will wait till wednesday and thursday morning set the trade when iv starts collapsing

put calendar is easy but butterfly is difficult to serup with three strikes to choose

 

market always goes down to scare FED but even if FED goes with 50 points it will rally  at least for few days

The answer to inflation is recession

if market dips another 10% we are in recession as most stocks which are hit will cut another 30% 

nflx roku coin are all approaching that redl line amzn included