Market Measures - December 14, 2020 - Losses, BPR, and IV
There is a direct relationship between the Implied Volatility of the underlying and: * The probability of a short strangle loss exceeding the buying power reduction. * The magnitude of a short strangle loss relative to the BPR (i.e. see TSLA compared to GOOGL) To have more certainty about your losses in a trade, stick to lower IV underlyings. However, this will lower the potential profit you stand to make.