Volatility Straddle

Discussion in 'Options' started by tooriginal, Nov 5, 2022.

  1. Vomma is higher for OTM then ATM (where it's close to zero). Therefore going long OTM strangles and neutralizing vega by selling ATM straddles has positive vomma and zero vega and therefore profits on any move in IV so long as the underlying stays close to the ATM strike.

    Vol Rising:
    upload_2022-11-5_14-37-39.png

    Vol falling:
    upload_2022-11-5_14-37-23.png


    Really it is locally convex in the combined total standard deviation, sigma * sqrt(T). So you want to see changes in this while the underlying stays fixed.
     
    earth_imperator, stochastix and cesfx like this.
  2. destriero

    destriero

    You're advocating iron flies. Better to choose short duration straddle strangle swaps. Root time neutral.
     
    jys78 and M.W. like this.
  3. kroxobor

    kroxobor

    Where I can read more info on that matter?