Thread by @KotaleKrishna

Sharing but knowledge about VIX.

VIX Index levels-

1. Ultra Low <12.5
2. Low 12.5 to 15
3. Medium 15 to 17.5
4. Normal 17.5 to 20
5. High 20 to 25
6. Ultra high 25+

(1/n) #optiontrading

Let’s look at the Short straddle success rate relative to the VIX Index Levels.

61% , 72% , 52% , 47% , 65% and 78% Respectively for mentions above VIX Level Range @ Entry time

(2/n)

How much did the straddle collects as a percentage of the stock price ?

2.2% , 2.7% ,3.3% ,3.7% , 4.5% and 6.7% Respectively as per VIX Level at entry time.
When option prices are cheaper, The VIX Index is lower since the VIX measures 30D options on INDEX

(3/n)

Despite collecting gas less premium in lower volatility environments, Success rates were still high and in some cases higher than selling more expensive straddles ( On higher VIX)

The amount of premium collected for selling an option doesn’t not determine success/profits (4/n)

I know it’s critical to understand that option prices are directly related to a stock’ realised volatility.

An exception to the above wold be if there’s an upcoming political/economic event that is perceived to be significant.
(5/n)

#optiontrading

What if has been a strong bull market. Which explains why most short straddles losses have been from market increases ?

71%, 71,% 51%, 49%, 72% and 69% Respectively as per VIX Levels at entry time.

#optiontrading

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