Would it be a good starting point to short the highest implied volatilities ? I understand that + OTM options have the highest %change (vs change) relative to implied volatility. + A change in IV will have a greater effect on longer term options + Short volatility by selling Calls & buying the underlying to delta hedge. + High implied volatility doesn't mean high value (vs high price). So the option better be a long term ATM / OTM Call. The implied volatility better be overpriced. The option better be tradable, liquid.
All sentences that you have pointed out have an "it depends" attached to them. As an example, look for these two sentences: - A change in IV will have a greater effect on longer-term options - A change in IV will have a greater effect on shorter-term options And you'll see what I mean.
This is what I see ... How long is long ? How short is short ? Longer will always be longer Everything else being equal... More time to expiration means more vega ? More vega means more exposure to IV change.
Try it. Fortune favors the brave, Step out of theory discussions and into reality. That's the best teacher, first hand witnessing and experience, self awareness
You would want to look at parameterizing the skew, assessing what parameter is high and selling calls over that theoretical. Just selling the highest IV does not account for slope and curvature normality in the skew.
Well just found out IB has a Model to price options. Looks like they are well priced according to IB's Model.