Trade ideas to take advanage of potential for sell-off in low vol environment

Discussion in 'General Discussion' started by Andrew C, Aug 6, 2016.

  1. Andrew C

    Andrew C Well-Known Member

    As we all know, volatility is extremely low right now. I am curious if anyone is consdiering putting on a trade to take advantage of the volatility increase that would come with a sell-off OR a directional trade. I am thinking of putting on a back ratio where I sell the just out of the money put on SPY and purchase two puts further out of the money. The set-up I am thinking of is selling the OCT 217 put and buying the OCT 208 put in a 1:2 ratio. The reason I picked OCT is to minimize theta decay while I wait. I would like to get anyone's thoughts on this as well as any other ideas.
     
  2. ACS

    ACS Well-Known Member

    Back spreads are great when there is a big fast move but can be murder when the move is slow. This market feels so over done that the former is more likely than the latter. Seems like a pretty decent idea if it can be done for flat or a small credit because who knows how long or far it can keep going up.
     
  3. Andrew C

    Andrew C Well-Known Member

    Thanks. I ended up putting on 1:3:2 put fly slightly OTM and buying a couple of additional puts. That way if we only get a minor move down I may benefit. If we get a strong move down then the extra puts will increase in value. Plan to keep on for a few weeks.
     

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