We always talk about how it is more beneficial to sell premium when Implied Volatility (IV) is high. We know that this allows us to collect a larger amount of premium and improves our probabilities. However, how much does the overall credit increase and how much better are our probabilities?
Today, Tom Sosnoff and Tony Battista look to put some numbers around the benefits of a higher IV. The guys find out that with a 10% point increase in IV, on average you received an additional $1.33 in premium, your breakevens increase by an average of 1.32%, and your initial probability of profit increases by an average of 4.18%!