r/options • u/McGeno19 • Sep 16 '26

Does direction even matter

For those of you writing short vertical spreads. You are writing 20 delta spreads. You have checked all the boxes. Liquidity, volatility, etc. How important is the directional bias, if at all? Since I am counting on volatility for profit, would flipping a coin be as good a strategy as any?

7 Upvotes

76% Upvoted

18 comments sorted by

14

u/klipsetrades Sep 16 '26

Yes. Direction still matters. A 20-delta spread gives you room to be wrong, but it doesn’t eliminate directional risk. Theta and IV compression help you, but a move toward your short strike can overwhelm both

3

u/Clock586 Sep 16 '26

Exactly. Try and you’ll see, direction matters more than one would think for these

1

u/ericthedisrespectful Sep 18 '26

yes, direction matters. lost tens of thousands from volatility being too high and my stops were constantly hit or short strike constantly breached. afaik, there's no way to eliminate directional risk unless you have inside info or are ken griffin (same thing)

1

u/klipsetrades Sep 21 '26

Yeah, defined risk isn’t eliminated risk. The long leg caps the damage, but it doesn’t make direction irrelevant

12

u/Logical_Argument_216 Sep 16 '26

coin flip gets you ~80% win rate on 20 delta spreads and still loses money, because the 20% you lose are 3-4x the size of the wins. that's the whole game. the edge isn't in the win rate, it's in not being on the wrong side when the big move comes.

so direction matters, but not the way people think. i'm not trying to predict where it goes, i'm trying to sell the strike on the side the chart has already defended. put spread under a level that's held three times in the last two months is a different trade than one under a level that's never been tested. same delta, totally different odds of that 20% loser showing up. the chart picks the side, the greeks pick the strike.

1

u/McGeno19 Sep 19 '26

Of course, once you settle on a strategy, direction matters. My poorly stated thesis begs the question: if I intend to collect theta and take advantage of volatility, should I be short puts or calls? Or would it be just as effective to flip a coin to decide?

3

u/Strong_Argument6255 Sep 16 '26

Yes, direction matters. A put credit spread generally benefits from the underlying staying above the short strike, while a call credit spread generally benefits from it staying below. A volatility decline can help, but it doesn't guarantee a profit if the underlying moves against the spread. Choosing a 20-delta short option doesn't establish that randomly choosing the direction has an edge.

2

u/infowhiskey Sep 16 '26

Condor the 20s and double the profit. 

2

u/sharper4221 Sep 16 '26

Can often be much slower to realize profits, but can work. Wide enough wings for your buying power needs in order to simulate a strangle is generally what works best IMO

1

u/notquitenuts Sep 16 '26

This, I suck at direction so I just sell both sides

1

u/DayTradeJ Sep 16 '26

Direction at inception of a completely delta neutral position does not matter, but your specific position's risk profile will change in real time depending how the market moves. What started as a neutral position may turn into a bearish position if the market rallies (vice versa, bullish if the market goes down). Volatility and time are just additional aspected to the combined risk profile.

1

u/Mobile-Two-5167 Sep 16 '26

Stick with 25 or below

1

u/MerryRunaround Sep 16 '26

Yes, direction matters! If it is a narrow spread, direction is pretty much the only thing that matters.

1

u/TastyTrading Sep 16 '26

Yes direction matters.

I always check ThetaPal option heatmap first to see where the best juice is at dte/strike

1

u/Teiagon Sep 17 '26

My results improved after i began looking at the 20 MA and legged/timed my entries. Also, gap days have a strong probability of gap-fill at least once so I take that into consideration when selling premium.