/biz/ - Business & Finance

>>50806530
> If that's the case, why can't I just sell an OTM option that's priced 200% IV and buy an ATM one at 80% IV (which happens to be equal to its HV) and just win every time?
Because in order to get that big of a difference in IV on a spread it would need to be a horizontal/diagonal spread of some sort. Which means at some point you will be long without a short leg or you will short without a long leg.
I do trades to capture high IV all the time. Last week I sold 2 NVDA 200 C’s naked at 1.98 a piece. Friday they closed at 1.35, today they opened at 0.46, and now they are now trading for 0.11.
Not every options trade involves volatility. Tight vertical spreads minimize the effects of volatility since the IV will affect both the short and long leg of the trade.