Key Concepts

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

High Implied Volatility Strategies

High IV strategies are trades that we use most commonly in high volatility environments. When implied volatility is high, we like to collect credit/sell premium, and hope for a contraction in volatility.

Historically, implied volatility has outperformed realized implied volatility in the markets. For this reason, we always sell implied volatility in order to give us a statistical edge in the markets. As premium sellers, we look to IV first, as it is the most important factor in pricing. We look to the current IV range as a way to gauge how the market is pricing IV relative to the past. When this IV is at the high end of its range, we will use strategies that benefit from this volatility extreme reverting back to its mean.

Now that we understand the reasoning behind why we put on high IV strategies, it is important to understand the specific trades we look to place. We look to collect credit in various different ways, including the sale of strangles, iron condors, verticals, covered calls, and naked puts. These strategies not only take advantage of an anticipated volatility crush, but also give us some room to be wrong because we can sell premium further OTM while collecting more credit than when IV is low. When IV is high due to a binary event (such as earnings), we might look to tastytrade specific strategies such as the beef n’ cheddar or the super bull.

High Implied Volatility Strategies Videos