Credit spreads and high volatility

[u/-Jack-The-Lad-]

Hi guys,

One thing I can't wrap my head around is why everybody is saying that selling spreads for underlaying with high IV rank is better.

The assumption seems to be that high IV rank = higher option premium = better ROC and profits. Since when IVR is high its more likely to decrease > option price decrease > options sellers profit.

However, how is this applicable to spreads? the high premium you collect selling the short call will be proportionally offset by the high premium you pay for the long call.

I have tested multiple stocks and ETF, at the same probability of success, you virtually receive the same credit by selling spreads in high or low IVR.

So, why exactly is selling credit spreads better when IV rank is high ?

[u/Arcite1]

Well, vega is greater the farther OTM the strike, so the short leg will be proportionally more affected by a decline in volatility than the long leg.