If you've ever watched any TastyTrade episodes with the 'Soz and Tony, you'll often hear Tom admonishing Tony to "quit showing him the chart." "Mmmm," you say, "Why does he do that?"
Well, it's because when "selling premium" (i.e., short strangles, iron condors, and credit spreads), price is not your signal to enter a trade, the implied volatility (IV) and/or implied volatility rank (IVR) is, regardless of what price is at that moment in time. (I've blacked out price from mid-June to the present; it won't help you with the timing of your premium selling play).
It is high IV/IV rank that make for richer premiums and therefore more profitable setups when selling premium via iron condor, short strangle, or credit spreads.
Naturally, this is entirely counterintuitive to most traders, who spend oodles of time analyzing fib lines, S/R, channels, etc., along with two-three indicators to help them evaluate the best moment to enter and then additional oodles of time staring at the screen waiting for the ideal setup to occur. Don't get me wrong; these techniques and methods may play a useful role in scalping and directional option strategies like debit spreads, but they are largely a waste of time when selling premium.
Point in fact, I'm not quite the purist that the 'Soz is when it comes to at least glancing at the chart to reassure myself that the strike prices suggested by either the 1 standard deviation line or the "expected move" for the expiry I've chosen make some innate sense in light of recent price action.
When selling premium, watch the underlying's IV/IVR, ignore the chart, and enter when IV and IVR are high ... .
Well, it's because when "selling premium" (i.e., short strangles, iron condors, and credit spreads), price is not your signal to enter a trade, the implied volatility (IV) and/or implied volatility rank (IVR) is, regardless of what price is at that moment in time. (I've blacked out price from mid-June to the present; it won't help you with the timing of your premium selling play).
It is high IV/IV rank that make for richer premiums and therefore more profitable setups when selling premium via iron condor, short strangle, or credit spreads.
Naturally, this is entirely counterintuitive to most traders, who spend oodles of time analyzing fib lines, S/R, channels, etc., along with two-three indicators to help them evaluate the best moment to enter and then additional oodles of time staring at the screen waiting for the ideal setup to occur. Don't get me wrong; these techniques and methods may play a useful role in scalping and directional option strategies like debit spreads, but they are largely a waste of time when selling premium.
Point in fact, I'm not quite the purist that the 'Soz is when it comes to at least glancing at the chart to reassure myself that the strike prices suggested by either the 1 standard deviation line or the "expected move" for the expiry I've chosen make some innate sense in light of recent price action.
When selling premium, watch the underlying's IV/IVR, ignore the chart, and enter when IV and IVR are high ... .
