Market Measures

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Buying Cheap Straddles

Market Measures

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Usually, we sell premium when implied volatility is high, but is there an edge of trying to buy premium when implied volatility is low?

Study
  • SPY, 2005 to present
  • 45 days to expiration
  • Bought straddles
    • All environments
    • VIX below 15

It turns out that no matter the IV environment or management strategies employed, buying straddles lost money on average and had a win rate of around 33%.

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