/biz/ - Business & Finance

>>50603018
>>50602971
>>50602884
Like here's a spread I constructed just now. What I would do is long something with 60 dte, and short something with 90 dte. For example, ISEE fits this criteria - the 5.00 puts on Sept 16 (245% IV) had a decent number of Vol>OI, so I looked into it further.

ISEE has a 90% IV percentile, but a current IV rank of 46%, which means it seems to be declining (the peak was actually 280% IV in Sept last year), and currently has an HV of 66%. But this means that a 245% IV is not justified.

So if I open a spread like picrel, I'm mostly gamma neutral, with a short position on vega. If I go delta neutral, then the P&L curve gets pushed into the higher prices (away from 1-2 SDs on the probability curve), so I opted to have a negative delta to get it within this SD range on the curve. This spread has an average IV of 253%, but if it drops by 60%, then it becomes quite profitable — but if the IV drop doesn't happen, then it's a losing position.

Since it's a 60/90 dte spread, I'd probably keep it for 30 days then exit. Of course, since I'm not entirely sure of what I'm doing, I'll just paper trade it and see how close I get.