When implied volatility rank is high, we tend to see greater profits across the board. However, we have different management strategies that can vary our performance. In periods of high IV Rank, what management strategy works best?Study
- SPY, 2005-present, 45 DTE
- Sold 16 delta strangles when IVR > 50 and all environments
- Compared managing at expiration, 50% of max profit and 21 days.
- Recorded Daily P/L and volatility of ending P/L
We find that managing at 21 days to expiration yields the highest P/L per day while having the lowest risk profile in all environments and when implied volatility is high.