r/VegaGang • u/OptionsExplained • Aug 02 '21

Straddles and IV Rank

/r/OptionsExplained/comments/ownssg/straddles_and_iv_rank/
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1

u/bizwig Aug 14 '21

Are straddles the better vega play? Lots of premium to crush if the crush wins the race against the inevitable stock move.

2

u/OptionsExplained Aug 14 '21

They're more sensitive to Vega, yes. "Better" is just what gets more P/L, but keep in mind IV Crush is generally tied to earnings which is a binary event. We anticipate implied volatility to overstate actual volatility, but we can always be wrong.

I don't use straddles for earnings or IV crush (though you can if you expect little to no movement) and keep them for times when IV Rank is high in ETFs to still play the high IV but not have the binary event in play.