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Why IV Expansion Losses Are Temporary

From Theory To Practice

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

Today, we dig into the three factors of profitability on an option’s position: direction, time, and volatility. Or even more specifically, delta, theta, and vega. And it’s important to remember that in the end, the only driver of a position’s profitability will be its moneyness. As a result, any spikes in IV that cause losses to a short premium position are temporary by nature.

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