Trading Different Volatility Regimes
The same setup produces a different result in a calm market and a stressed one, so identifying the volatility regime comes before choosing any target.
How do you identify the current volatility regime?
Compare recent realised volatility against implied volatility and check where the underlying sits relative to the gamma flip. Low realised volatility above the gamma flip indicates a compressed regime, while rising realised volatility below the flip indicates an expansive one.
How should targets change with the volatility regime?
Compressed regimes require closer targets, because price rarely travels far before mean reverting back toward the heavy strikes. Expansive regimes require wider targets and trailing exits instead, because fixed targets consistently leave the majority of a strong trending move uncollected on the table.
Why does the same stop distance fail across regimes?
A stop sized for a compressed regime sits inside the normal noise of an expansive regime and gets hit on movement that means nothing. Stop distance must scale with the range the market is currently producing rather than staying fixed across every condition.