Market Measures - April 20, 2021 - Managing Exposure in Low IV

published 2 weeks ago by tastytrade, Inc.

As shown in yesterday’s Market Measure, short premium strategies are still relatively profitable in low IV but tend to have lower average P/Ls and larger outlier losses. Although defined risk trades tend to have lower POPs and profit potentials compared to undefined risk trades, defined risk trades provide protection against extreme losses. Therefore, defining risk in low IV is one way to manage the outlier loss exposure while capitalizing on the benefits of short premium. Join Tom and Tony as they compare the low-IV performance of a strangle and a wide iron condor (which statistically similar to a strangle but has defined risk).

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