Market Measures

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Why We Don't Sell Naked VIX

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.

Today Tom and Tony look at why we use defined risk trades when selling premium in the VIX. In this study they compare selling 50 and 30 delta calls with 50/10 and 30/10 delta call spreads across various IVR environments. Volatility on Volatility can expand quickly making the need for defined risk trades in the VIX a top priority. Limiting the max loss by trading call spreads instead of naked calls lead to higher profitability especially in high IVR environments.

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