As a general rule, when implied volatility percentile is high, it’s better to focus on short volatility trades such as iron condors, short straddles and strangles.
It also makes sense to compare a stocks current IV Percentile to the market in general. If all stocks are showing high IV Percentile, then there might not be much of an edge in selling volatility on a specific stock. But, if general market IV percentile is low, that could be a good time to sell overpriced volatility in some of the names above.
Checking the S&P 500 IV percentile, we can see that it is currently sitting at 90% which is also a high reading. So there likely isn’t much edge in selling volatility right now, but perhaps it’s a good time to look at going long volatility on some names with low implied volatility percentile?
Please remember that options are risky, and investors can lose 100% of their investment. This article is for education purposes only and not a trade recommendation. Remember to always do your own due diligence and consult your financial advisor before making any investment decisions.
*Disclaimer: On the date of publication, Steven Baster did have (either directly or indirectly) positions in some of the securities mentioned in this article. All information and data in this article is solely for informational purposes. Data as of after-hours, Apr 25, 2022.
Provided Content: Content provided by Barchart. The Globe and Mail was not involved, and material was not reviewed prior to publication.