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training_data/curated/text/a66ce7ab867149040189bb383e3795b3143b096fb735a120ab3ae7133066bab8.txt

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+point at which these lines meet is an indication that IV may be beginning to
+get cheap.
+First, it’s a potentially beneficial opportunity to buy a lower volatility than
+that at which the stock is actually moving. The gamma/theta ratio would be
+favorable to gamma scalpers in this case, because the lower cost of options
+compared with stock fluctuations could lead to gamma profits. Second, with
+IV at 35 at the first crossover on this chart, IV is dipping down into the
+lower part of its four-month range. One can make the case that it is getting
+cheaper from a historical IV standpoint. There is arguably an edge from the
+perspective of IV to realized volatility and IV to historical IV. This is an
+example of buying value in the context of volatility.
+Furthermore, if the actual stock volatility is rising, it’s reasonable to
+believe that IV may rise, too. In hindsight we see that this did indeed occur
+in Exhibit 14.4 , despite the fact that realized volatility declined.
+The example circled on the right-hand side of the chart shows IV
+declining sharply while realized volatility rises sharply. This is an example
+of the typical volatility crush as a result of an earnings report. This would
+probably have been a good trade for long volatility traders—even those
+buying at the top. A trader buying options delta neutral the day before
+earnings are announced in this example would likely lose about 10 points of
+vega but would have a good chance to more than make up for that loss on
+positive gamma. Realized volatility nearly doubled, from around 28 percent
+to about 53 percent, in a single day.