What would be the option strategy in volatile times with a news driven market? Example a Budget day

General
2

As opposed to the popular strategy of buying a straddle or a strangle, I'd always prefer doing the opposite i.e selling a straddle or a strangle.

The reason is that the volatility usually shoots up before an event driving up the premiums making the options expensive. The best time to initiate the short would be about 5-6 days before the event.

As the event unfolds the volatility drops thereby the premiums. Hence this would be the best time to exit the trade as well. 

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3

During such times, best strategy is “Do Not Trade”.

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4

Nicely said, as opposed to the view that volatility kicks in during occurence of events, but it actually kicks in well before for known events.

5

Absolutely, it always works like that :slight_smile:

6

Of course, if the event is sudden and unexpected (like a natural disaster) volatility gets wacky and shows its true colors.