how to manage trades in IV drops and Peaks would you say this is an IV drop and a peak yeah I would say that's pretty good I would say this is a pretty damn good title for where we are right now in with respect to the markets and things like that let's take a look and see what we got after every IV implied volatility Peak and every IV trough it may be wise to consider adjustments to strategies that were tailored for exceptional IV periods meaning either they were too high or too low on a relative basis around Norms so it's important to note that as shown in our studies implied volatility experiences a significant decline in 2023 and has remained in a similar range in 2024 averaging about 15% a date today we're going to focus specifically on managing the Delta of short strangles in different IV environments we're going to look at two different periods 2016 to 2018 and 2020 to 2024 in the 2016 to 18 period we had low implied volatility and the vix was averaging around 14 from 20 2020 to 2024 the IV remained High declined with the vix dropping from 40% to 25% and averaging 15% in 2024 so far what we're going to do is we're comparing selling the 25 Delta the 16 Delta 25 Delta and 35 Delta strangles 45 days to expiration manag at 21 days and we're going to observe the different results in each of these strangles over for each time period just to see hey what happens when volatility is higher and goes lower what happens when volatility is lower and then you know eventually goes higher let's take a look all right so lots of stuff here and sure bear bear with us a little bit the most important thing when you look at this from just the first view is the win rate and the thing that you notice with the win rate is that um and and this is in periods of really low implied volatility so we always talk about in low implied volatility you got to be careful all right the win rate remains super high 75% 73% 72% the average premium you have no context around that so it seems like it's okay but you start to look at the average p&l and you're like okay that doesn't seem like it's that much money for taking that much risk sure and the worst loss is a big multiple of your average gain so when you look at your p&l per trade and then you look at your return on Capital you know you got to be thinking to yourself I'm taking a lot of risk for an 8% return on capital or or a 177% return on Capital in periods of low implied volatility trading was tough in 2016 to 2018 widening your short Delta strikes in low IV environments can lead to higher profits but as you scale up the Delta strikes the average p&l tends to decline both profit and return on Capital decreases because the additional premium that you collect doesn't sufficiently compensate for the increased risk of the position moving against you basically all we're saying is in low impli volatility you got to be careful you got to work really hard Y and the return on Capital at the bottom is something I just want you to just keep in the back of your head right here 178 and 6 now we're going to look at a different time period 2020 to 2024 in this time period you can see that the win rate is virtually the same but you can see the premium that we collect is almost is over double you can see that the worst losses remain the same the buying power per trade actually goes down a little bit but the return on Capital goes from 17 to 41 goes from like 8 to 48 and from 6 to 51% the difference between low implied volatility and high implied volatility is the difference between survival and wealth creation you see these numbers here yeah I'm looking at right now 41% return on Capital 4851 now you're talking to me baby go back one slide John for a second here's the return on Capital in a in a 2-year low implied volatility period if you did everything right 178 and six then you fast forward one slide and you're at 41 you know you're at 41 48 51 everything changes with respect to you know higher implied volatility you could sell bigger Delta strangle you can make you know you can actually make some money your win rate didn't change either which is nice so now the win rate doesn't change at all in periods of high INF flight volatility pnl and return on Capital are higher across the board however scaling Delta strikes both the 25 and 35 has resulted in a significant increase in the average premium collection Ed compared to sticking with the 16 Delta strikes leading to a better overall performance basically saying that when there's more opportunity take more risk to summarize in one sentence higher a heightened implied volatility conditions Elevate the average profitability of all strangles particularly those with higher Delta values again higher opportunity take more risk one contributing factor is that as implied volatility Rises it commonly results in more expensive option premiums faster time to an increased premium for options with higher Delta values which is correct across the board that's exactly what happens hard to do the numbers are they speak for themselves let's go to next slide so some of the takeaways here adjusting your Deltas of your short premium position response to changes implied volatility whether it rises or Falls can contribute to stabilizing a portfolio's risk risk exposure this is because alterations in implied volatility impact the risk and return um of all deltas and boosting the Delta of a strangle can be profitable when there's High implied volatility but lower IV environments lead to less lead to less outcomes when less good outcomes when trading higher Delta strangles meaning that the returns in low implied volatility when you when you trade the 25 and 35 Delta strangles not very good when you in high implied volatility great that's the whole difference very nice you want to know something that was so short so sweet so compact so to the point really made a really nice takeaway there but you know somebody else is going to give you a nice takeaway SA