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The Tradeoff of High IVR

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.

We generally like to sell volatility at higher levels because it has a good chance of contracting, which would provide option sellers with sizable profits.

What is the tradeoff of selling premium when IV Rank is higher?

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We find that the tradeoff that comes with a high IVR and higher profits are more swings in your P/L and fewer occurrences. This does not mean you shouldn't trade high IVR, but rather recognize that when you do, you are taking on more risk to make more money per trade on average.

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