Volatility Edge Opportunities

The Rationale (The "Why")

The core of this strategy is identifying when the market's fear is greater than reality. IV represents the expected future movement priced into options, while HV, historical volatility, shows how much the stock has actually moved in the recent past. When IV is significantly higher than HV, it means the "volatility insurance" being sold by the market is overpriced.

This scanner finds these moments and constructs an Iron Condor to sell that overpriced volatility. An Iron Condor is a defined-risk, market-neutral trade that profits if the underlying stock stays within a certain range. We are betting that the stock's actual movement will be less than the market's fear implies, allowing us to collect premium from time decay.

How to Trade It (The "What")

1. This is a credit trade The credit received to enter the position is the maximum potential profit.
2. The trade consists of selling a call spread above the market and selling a put spread below the market, creating a wide profit range. The legs on the ticket show the specific strikes.
3. The Maximum Profit (Max P) is the credit collected. This is realized if the stock price is between the two short strikes of the condor at expiration.
4. The Maximum Loss (Max L) is the width of the spread wings minus the credit received. This only occurs if the stock makes a very large move, either up or down, past the long strikes.
5. This is a high-probability, positive-theta strategy. The goal is for time to pass while the stock remains relatively stable, causing the value of the options sold to decay.