Just because absolute IV is high or low doesn't mean trading long call/puts Is wrong, a lot of meme stocks that had fat tail events had high absolute IV. (1/n)
Since volatility clusters In the short term, I found trading long vol positions to be more beneficial when absolute IV is high due to the clustering effect In rvol(more vol begets more vol.). Especially true for SPX 0-5dte straddles. (2/n)
A simple chart of VRP(IV - RV20) will show you most of the time when absolute IV was high, RV was higher than IV(making options cheaper, since RV was bigger than Implied.) during times of lower absolute IV VRP Is much bigger.
If you liked this thread, please retweet so we can Inform more people! Thanks my fellow swans!
Loading suggestions...