What is Sticky Strike Strategy

Please explain Sticky Strike Strategy.

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This involves volatility curves/skew. As the underlying moves, you assume that the shape of the curve stays the same; however, do the IV points on the curve align with strike or delta? This is a pretty advanced topic especially given the relative flatness in many NSE vol curves. What specifically are you interested in?

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Thank for your quick response as usual. It looks like the entire team clarifies the doubts round the clock.
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In one of the Master Class Dr Chirag Shah explained “Sticky Strike Strategy” but I failed to grasp it.
Still I am not confident to use the strategy for Option Buying. It would be helpful if you can explain with an example.

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Thanks for the feedback! We are definitely working to be as proactive in responding as possible.

Very interesting…I didn’t realize that this concept was being discussed in the Master Class. Here is an example that hopefully clarifies things a bit. Let’s say that underlying ABC is trading at 100. You also have the following strikes (with IVs and deltas):

95 (ITM): IV = 13%, Delta = 0.60
100 (ATM): IV = 10%, Delta = 0.50
105 (OTM): IV = 12%, Delta = 0.48
110 (OTM): IV = 13%, Delta = 0.40

Let’s say that the underlying moves up to 105. The concept of ‘sticky strike’ for volatility skew would say that the vol curve would shift along the strike. So, the 13% - 10% - 12% IV curve for 95-100-105 would shift to the 100-105-110 strikes. Since volatility is a function of buying and selling pressure, this could possibly be an indicator of option mispricing at a particular strike. I’m going to tag @Dr.ChiragShah because I want to make sure that I’m not referring to something different than he was in the course.

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In sticky strike strategy , Buy weekly ATM call option of Nifty , if market is expired above strike price then close ITM option and buy same strike ITM option (Stick with strike) of next week on expiry day ,
If market expired below your strike price then again buy ATM call option of next week.