One of the basic principles in Option trading is understanding how Implied Volatility works – and when to buy it, and when to sell it. When I was considering a trade in $RSX on Monday, 03/03, I elected to take advantage of the elevated premium – a high IV – and sold a Strangle:
I sold the March 24 Calls & 22 Puts for a $1.30 credit. As noted, this trade takes margin until closed. At the present time, this strangle can be bought back for $1.05 so some of the IV has “come out” of the trade as tensions chillax even though price has continued to recover to near the $23.50 level.
High IV = sell premium
Low IV = buy premium