From Theory To Practice - March 12, 2021 - Why We Buy ATM Vertical Spreads
As premium sellers, we much prefer to be on the short side of the option contract. This allows us to take advantage of theta decay, IV contraction, and higher probabilities of profit. However, in market environments where IV is low, it can be challenging to find good opportunities to stay engaged with short premium. In these situations, one of our favorite low IV strategies is the Long Vertical Spread. Interestingly, with this strategy we typically set up our strikes around the at-the-money mark.