In a space where it is all too easy to forget about what really matters, it is refreshing to see your posts here getting things back to basics. I have a long 'fly that was fairly delta neutral. Monday's drop not only took the body from ITM to OTM, it ate into the moneyness of my ITM wing and the spread lost value. As Atticus put it in his usual pithy style, if you can't forecast price and vol with some accuracy, none of the rest matters.
This sentiment is precisely why there are more edge providers in vol trading than in direction. When the vast majority of participants give little thought to one of the pricing variables, it allows for certain others to base entire strategies around it because there is a lot of edge to be had.
5-6 at different stages. Usually, you need to REALLY understand the structure to be able to predict how it is going to effect the vol, considering the floating strike nature, early ex clauses and possible caps. Yes, granted vol is more frequently mis-priced, for a variety of reasons (concentrated positions, market environment etc). Unfortunately, there are a few key problems. First of all, that bias is almost always in one direction - too rich so yo have to sell risk premium which, overall, is a scary trade. Secondly, you can be right on vol and still lose money on delta. Thirdly, your ability to offer good return on capital is usually driven by delta, not by your delta neutral strategies.
From my perspective, investing is all about trading in "probabilities". That being, the "probability" that the assigned "unit of cash", will generate the desired income, per unit of time. I don't understand the attraction of continually investing in low probability trades. Yes, they have a higher "potential" reward. But that greater potential is off-set by the lower probability of actually collecting it. Or to put it another way, it makes more sense to make a "rare", but large, low probability bet,.... than a strategy of 100 of them over time.