Sell in High IV to Maximize Theta

As tastytraders, we like to sell premium 45 days to expiration and manage our trades 21 days to expiration. The reason is to maximize our theta while minimizing risk.

Let's explore the unique relationship between theta and implied volatility to see if we can maximize theta using IV.

We see a clear correlation between theta and IV. As IV increases, so does your theta as percent of capital used.

This implies that to maximize theta in our portfolio, sell in periods of high implied volatility.