in realized volatility. The rise in IV did indeed occur, but not immediately.
By Tuesday of the second week, vega profits were overshadowed by theta
losses.
Gamma was the saving grace with this trade. The bulk of the gain
occurred in week two when the Fed announcement was made. Once that
event passed, the prospects for covering theta looked less attractive. They
were further dimmed by the sharp drop in implied volatility from 40 to 30.
In this hypothetical scenario, the trade ended up profitable. This is not
always the case. Here the profit was chiefly produced by one or two high-
volatility days. Had the stock not been unusually volatile during this time,
the trade would have been a certain loser. Even though implied volatility
had risen four points by Tuesday of the second week, the trade did not yield
a profit. The time decay of holding two options can make long straddles a
tough strategy to trade.