Trading Spreads or Trading Outright Calls?
One of the biggest problems that an option trader faces is assessing whether an option is worth buying/selling. This is especially true when the implied volatility in a name is very high. For example, when the weekly straddle on the SPY costs $5 on a Monday (like it was today), if you wanted to play the SPY for a directional bet, you must be wondering whether it is a worthwhile play. In times like these a trader must consider trading spreads instead of just trading outright calls and puts.
Lets look at an example of how a spread would be beneficial when trading SPY when the IV is high.
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