Market Measures

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High IV | Strategy Analysis

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.

As premium sellers, we are always looking for underlyings that have a high Implied Volatility (IV) and a high IV Rank. This allows us to get further away from the at the money strikes for the same amount of credit or collect a larger amount of credit if we want to use the same strikes. Now that more volatility is starting to come back into the market, we thought it would be a good idea to review all of the strategies that we use to take advantage of high IV and look for a collapse in volatility. Today, Tom Sosnoff and Tony Battista take a look 6 different short premium strategies that we will look to implement. The guys discuss Strangles, Straddles, Jade Lizards, Iron Condors, Iron Flies and Broken Wing Butterflies. All of these strategies look for a reversion in IV so that we are able to buy back our short options for a cheaper price. After Tom and Tony show you how to set up these strategies using dough, they take a look at the Return on Capital (ROC) for each. ROC is important because now that they are looking to put on more positions, they want to be sure that they are using capital more efficiently.

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