Most option buyers don’t lose because they’re wrong on direction — they lose because they bought at the wrong time. You can be dead-on with your thesis, have your levels mapped out, and still get smoked.
Why? Because the one thing working against you wasn’t price — it was volatility.
If you’re buying options in a high implied volatility environment that’s already been priced in, you’re toast unless the move is huge and fast. The moment that volatility starts to contract, your premiums bleed out faster than the underlying can help you.
That’s why the best trades for option buyers come from one setup: when volatility is low and about to spike.
Why Volatility Expansion Is the Key
This is the only environment where buyers actually hold an edge — when implied volatility is underpricing what’s about to happen. That means you’re paying less for contracts than they’re actually worth if the move comes, and that shift from low to high volatility gives your option value a jolt, even before price fully gets there.
So how do you find it? It shows up in tight price action, compressed ranges, narrow candles, and flat volatility readings — and then suddenly, something shifts. You get a breakout, a gap, or a surge in volume, and IV starts climbing fast. That’s your cue.
Once volatility expands, your premium starts accelerating. That’s the moment option buyers want to be in — not after the move, not during the chop. Before the pop.
The One Pattern You Can’t Afford to Miss
This entire market right now feels like an earnings cycle without the earnings. We’re in a regime where implied volatility is elevated, but actual moves are underwhelming. That’s a death zone for buyers. The trades that are working are the ones where IV starts low and suddenly re-rates higher — not the ones that are already maxed out.
I’ve been focused for months on scanning for that transition — where volatility is just starting to pick up, but the move hasn’t hit yet. If you catch that right, you get the double tailwind of direction and IV expansion. That’s how you get paid as a buyer.
But if you’re chasing heat in an already hot volatility environment, you’re overpaying — and even if you’re right, you still lose.
So if you want to be on the right side of explosive trades, stop staring at the chart and start watching volatility. The big moves start when everyone’s asleep — and wake up the moment IV does.
Kane Shieh
Kane Shieh Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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