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Bullish Strangles in High IV

Market Measures

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

One of the options trading strategies that is central to the tastytrade method is the 1 Standard Deviation Strangle, or the 16 delta Strangle. We like to sell these options when they are expensive relative to their historical prices. We gauge that expensiveness by measuring implied volatility.

This strategy begins with no delta bias built in. However, we have noticed that the market tends to display expensive options when the price of the underlying has sold off.

Today’s Market Measures segment tackles the question of whether or not we should initiate high implied volatility trades with a bullish bias in mind.

The Study The Results

We saw little change in the bullish Strangles in IWM compared to the neutral ones that we tend to default to. Check out the full results in the segment above.

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