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Hesitation When Buying VIX

Options Jive

Here at tastytrade, we tend to have a short bias when it comes to implied volatility in most markets, equities in particular. However, when IV is low, there is a temptation to flip that bias and get long products like the VIX or to buy premium in underlyings likes the S&P 500 ETF (SPY) via long Straddles and Strangles. Our long-term short bias, though, usually causes us to hesitate when thinking about implementing long IV strategies, and rightfully so.

Tom refers to the last year’s VIX range as being lower than historical ranges, and thus it has been a tougher time to buy IV or vega. Since implied volatility tends to stay low when it is at its lows, we hesitate to initiate long IV trades and sell IV in all environments, while reducing the size of short premium trades in very low IV so as to have capital available in the event of a volatility spike.

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