Friday's specially after the introduction of weeklies have become very unpredictable for option sellers IMO. Usually I'm able to forsee a volatile move & if not then through hindsight analysis I'm able to understand how a spike manifested, which ultimately adds to my system.(1/n)
But days like 14th Aug'20 when everything is going super fine & all of a sudden within seconds huge vol spike occurs is baffling. There are many such Friday's before when such moves have manifested without any prior sign of volatility (according to me). (2/n)
What i have understood is that since current weekly has max liquidity & Friday is the first day of a new series, the positions are not mature enough. So the operator can afford to shake up things. I haven't seen such spikes coming on Tue-Thus without prior signal. (3/n)
Even if huge vol spikes occur on say Wednesday, there are many small spikes before that, which can caution a good trader who has a sense of following the markets. Some Friday's do give great theta decay, specially when Vix is below 18. (4/n)
But that's because there is no inherent volatility in the markets. Nowadays I look for directional or long vega trades like backspreads on Friday. I still go for short straddle if the IVs are falling consistently, but only late in the day for a quick theta capture. (5/n)
But nothing is permanent. As i said if vix goes below 18, then Friday's also become smooth. But since there is ample theta left in the week, one can take his time in understanding how the volatility is playing out. (6/n)
Such posts are for option sellers who want to get into the depth of volatility. If taking random trades through backtesting with fixed SL is working out for you, then you shouldn't bother with such details. But in my experience there will come a time when it would be needed.(7/n)
• • •
Missing some Tweet in this thread? You can try to
force a refresh
