Market measure segment, sponsored by CBOE, examined how changing volatility affects options pricing dynamics. The study analyzed 16-delta strangles with 45-day expirations across different VIX environments from 2020-2025.
When volatility rises, strike distances widen significantly—moving from approximately $15 out-of-the-money in low VIX environments to $26 when VIX exceeds 25, representing a 76% increase in distance. This wider placement benefits option sellers by providing more cushion against price movement.
Break-even ratios shift asymmetrically between calls and puts. While call break-even ratios remain relatively stable during volatility spikes, put ratios increase substantially due to skew. In high-volatility environments, options sellers receive more premium for positions that are further from current prices, especially on the put side.
The key takeaway: understanding how volatility changes affect strike placement and premium collection helps traders make more informed decisions when volatility expands.