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+Verticals and Volatility
+The IV component of a vertical spread, although small compared with that
+of an outright call or put, is still important—especially for large traders with
+low margin and low commissions who can capitalize on small price
+changes efficiently. Whether it’s a call spread or a put spread, a credit
+spread or a debit spread, if the underlying is at the short option’s strike, the
+spread will have a net negative vega. If the underlying is at the long
+option’s strike, the spread will have positive vega. Because of this
+characteristic, there are three possible volatility plays with vertical spreads:
+speculating on IV changes when the underlying remains constant, profiting
+from IV changes resulting from movement of the underlying, and special
+volatility situations.
+Vertical spreads offer a limited-risk way to speculate on volatility changes
+when the underlying remains fairly constant. But when the intent of a
+vertical spread is to benefit from vega, one must always consider the delta
+—it’s the bigger risk. Chapter 13 discusses ways to manage this risk by
+hedging with stock, a strategy called delta-neutral trading.
+Non-delta-neutral traders may speculate on vol with vertical spreads by
+assuming some delta risk. Traders whose forecast is vega bearish will sell
+the option with the strike closest to where the underlying is trading—that is,
+the ATM option—and buy an OTM strike. Traders would lean with their
+directional bias by choosing either a call spread or a put spread. As risk
+managers, the traders balance the volatility stance being taken against the
+additional risk of delta. Again, in this scenario, delta can hurt much more
+than help.
+In the ExxonMobil bull put spread example, the trader would sell the 80-
+strike put if ExxonMobil were around $80 a share. In this case, if the stock
+didn’t move as time passed, theta would benefit from historical volatility
+being’s low—that is, from little stock movement. At first, the benefit would
+be only 0.004 per day, speeding up as expiration nears. And if implied
+volatility decreased, the trader would profit 0.04 for every 1 percent decline
+in IV. Small directional moves upward help a little. But in the long run,