Trade Ideas for Today's Pop in Implied Volatility

Hi Steemians,

today we saw a nice sell off in the markets and therefore a spike in the VIX.
The E-Mini S&P 500 Futures (/ES) are down 75 handles and the VIX is up 5.48 points.

E-Mini S&P 500 Futures (source:tastyworks)

CBOE Market Volatility Index (source:tastyworks)
Based on yesterday's closing prices, this was a 3 standard deviation move.
That's a big move, which had a probability of only 0.3 percent. Or a 99.3% chance of not happening.
A spike in implied volatility makes option prices expensive.
A premium sellers dream.
There are lots of opportunities out there.

So let's have a look at three different strategies, which you could implement tomorrow.

Legal disclaimer: These are not trade recommendations. Options involve risk and are not suitable for all investors. The trades shown below are for educational purpose only.

1. 30 Delta Short Strangle in IWM (delta neutral)

• sell to open May 147 put
• sell to open May 159 call
• net credit $4.28
• profit target $2.14 (50% of max profit)
• buying power reduction = $2,451
• max loss = unlimited
  
  (source:tastyworks)
  How to manage this trade:
• close if you reach 50% of max profit ($2.14), or 2x credit loss (close at $12.84)
• if one of your strikes gets hit, roll the untested side down/up into a straddle
• if there are only 21 DTE left, close or roll into next month to avoid gamma risk.

2. Short 30 Delta Put in KRE (long delta play)

• sell to open May 58 put for $1.06
• profit target 53 cents (50% of max profit)
• buying power reduction = $914.65
• max loss = $5,694
  (source:tastyworks)
  How to manage this trade:
• close if you reach 50% of max profit (53 cents), or 2x credit loss (close at $3.18)
• if there are only 21 DTE left, close or roll into next month to avoid gamma risk.

  3. Broken Wing Call Butterfly in QQQ (short delta play)

  • buy to open 1 May 162 Call
  • sell to open 2 May 165 Calls
  • buy to open 1 May 185 Call
  • net credit $2.75
  • buying power reduction/max risk = $1,425
  • max profit = $5.75
  • profit target: 50% of max profit = $2.87
    (source:tastyworks)
    How to manage this trade:
  • close if you reach 50% of max profit (2.87 cents) or butterfly it off, by buying the 168 call (if you can buy the 168 call for less than $2.75, you have a free long butterfly on)
  • if there are only 21 DTE left, close or butterfly it off, if you can, to avoid gamma risk.

  If you liked this post, please upvote and resteem.

  Good luck tomorrow,
  Stephan Haller