IV Regime Scenarios — Volatility Environment
IV regimes determine option pricing power — low vol favors sellers, high vol favors buyers
Scenario 1 · Low Vol Regime — Calm Market
IV below 20%: premium sellers thrive, theta decay dominates, gamma flat
🌊 Low IV = sell premium, collect theta
Scenario 2 · High Vol Regime — Volatile Market
IV above 30%: option buyers benefit, gamma scalping active, vega dominates P&L
⚡ High IV = buy options, gamma scalp, hedge vega
Scenario 3 · Vol Spike Transition — Fear Event
IV spikes on event/shock: short vol positions squeezed, long vol profits
💥 Vol spike = shorts squeezed, buy premium early
Scenario 4 · Vol Crush Transition — Relief Rally
IV collapses post-event: options lose extrinsic value rapidly, short vol wins
📉 Post-event IV crush = sell premium after spike
Low Vol Regime
High Vol Regime
Vol Spike
Vol Crush