Since we know we make higher profits with similar POP in periods of higher implied volatility, how much premium do we receive on average, and how much additional premium do we receive when we sell in periods of high IV?Study
- SPY, 45 Days to Expiration, 2005 - Present
- 16 delta strangles
- Average premium collected in all environments
- Average premium in varying IV environments
- Note: In this segment, premium is recorded as the following in order to normalize for changes in stock price:
- Premium = Credit ÷ Stock Price
We find that, on average since 2005, we receive 1% of the stock price as premium. In periods of higher IV we can expect roughly 50-100% more premium and in periods of low IV we can expect roughly 30% less premium.