Low vol can remain low for a very long time. If you have a model that produces a decent forecast over your trade horizon, then you *should* be selling straddles on most days, currently. However, no pain, no gain. Even though the VRP is strong across the front of end of the term structure, the trader still has to battle with the heightened gamma associated with his/her position in a low implied vol environment. One modestly strong uptrend and you're essentially out of life rafts and forced to exit at a loss--ie the position becomes unhedgeable (usually). So you've got to be patient and fine tune [as best you as you can] your entry timing.
@darjohn25 Hi, Darrin. If an uptrend blows straddle sellers out of their positions, would this create an “indices up, volatility up” scenario?
@darjohn25 How front end is front end? 0DTE? Or more like 7-21 DTE? I wasn't sure whether to take the "selling straddles on most days" literally and infer 0DTE?
@darjohn25 HNW RIA: “why sell the upside when you can sell 2x the downside? What is ‘vol’ anyways, we just trade the position to expiration” 💅🤠
@darjohn25 Glad to see you're back posting. Do you have any resources on intraday options modeling. It seems that theta only picks close to end of day, but not sure how to model it.
@darjohn25 Options novice here (college finance class) - is the gamma high when vol is low because if the underlying were to move, delta would be higher? Also, how would one hedge against gamma in a short strangle position?
@darjohn25 how similar is SPX selling straddle to going short VIX futures or VIX ETFs?