Why Retail Traders Buy the Wrong Strangles
Options Trading with Fexingo: Calls, Puts, and Derivatives for Retail InvestorsShow Notes
Retail traders often sell strangles to collect premium, thinking they are buying insurance against big moves. But when volatility spikes, those short positions get crushed not by direction, but by the skew itself. We look at how implied volatility skew works, why selling out-of-the-money options is riskier than it looks, and how the VIX of VIX can signal trouble before the market does. Using recent market data from early September 2026, we break down a specific case where a popular trade went wrong because traders ignored the tail risk priced into the skew.
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