Hey Mark, how do you get that $34.85/straddle and 24% average implied vol. With average spx price of 5k, I need roughly 15% vol to get to $38/straddle for 1dte.
The 24% implied vol was my read on the 0DTE pricing today, a little before RTH opened, so ~8hrs to expiration.
The simple average of implied volatility at time of trade for this study was about 18%, and that's for the full 24 hours. (Close to close). Today's reading was a little closer to expiration, so not perfect comparison, but it's also a higher than average 0dte vol day.
With 18% ivol, I get straddle price = $45.4 using 5k average spot, t = 1/252, and straddle approximation formula.
To get to $34.9 straddle price, the implied vol would be closer to 16%.
Great write up. Dont sell straddles - The point resonates. Thank you as always. Just wasn't sure if I was missing something.
Hey Mark, how do you get that $34.85/straddle and 24% average implied vol. With average spx price of 5k, I need roughly 15% vol to get to $38/straddle for 1dte.
I am missing something...
Great Q, I should have been a bit more clear.
The 24% implied vol was my read on the 0DTE pricing today, a little before RTH opened, so ~8hrs to expiration.
The simple average of implied volatility at time of trade for this study was about 18%, and that's for the full 24 hours. (Close to close). Today's reading was a little closer to expiration, so not perfect comparison, but it's also a higher than average 0dte vol day.