I was thinking about buying some SP500 puts both as a speculative play and also to protect my long position. Puts are fairly cheap right now with the VIX at 46. So them I thought of something. My puts would be priced April 730 on the assumption the market will not hold the November bottom. If the market should break the bottom volatility will naturally go up increasing the profitability of my put. Is this already considered in the price of the put or could you theoretically trade call and puts at respective major top and bottom prices merely to profit from the increased volatility which is sure to follow?
quite funny you find vol 46 'fairly cheap' whereas that has been considered 'extremely expensive' over the last thirty years.
Look at the current IV of the put itself, rather than the level of the vix. This will give you the best idea of what is already "priced in."