With 10 Year Treasury Implied Volatility and Implied Volatility Rank at the lowest levels we’ve seen in years the Research Team decided to investigate the viability of buying premium in these products.The Study:
- /ZN and TYVIX
- 2010 to Present
- Compared Success of Buying Strangles in 10YR Treasury Note when IV Rank was Low
- Theoretical Back Test Using Futures Price Data and IV Index Data
- 30 DTE Options
Even with the low Implied Volatility and Implied Volatility Rank, Implied Volatility continues to overstate in these Treasury markets, thus resulting in negative performance for long strangles in /ZN. Although these losses can be reduced by waiting for IV Rank to be below 25% the strategy is still net negative.