How can I be short volatility on a stock without getting exposed to moves in the underlying?

Question

Given the current high volatility situation I'd like to benefit by deploying my mostly conservative portfolio in making bets that are short volatility. In particular some stocks like GME and BB and EXPR are hitting 500%+ implied volatility. I would not like to be exposed to any of their (crazy) price movements, but I'd like to bank on the fact that IV will inevitably get back to normal levels and make money on it going down.
Is there some combinatorial options trade that allows me to short volatility  without exposure to underlying?

Bob Baerker · Accepted Answer

You want to short volatility without exposure to underlying and you don't like strategies like a Butterfly because it has a limited range of profit.  Unfortunately, you're looking for a unicorn.
In situations like AMC, BB, GME where the implied volatility is extremely high, selling short options brings in a fat premium but it is a recipe for disaster since the directional risk is huge.  Therefore, bounded strategies such as spreads are more logical since they prevent catastrophe.  But unfortunately with these, you still have to get the direction right.  And to make matters worse, 500% IV tends to come with very wide bid/ask spreads.  The deck is really stacked against you.
There are no free lunches here.

Nick · Answer

If you want to bet that future volatility will be below the current implied volatility, you can trade the following option strategies:

Short butterfly: https://en.wikipedia.org/wiki/Butterfly_(options)
Short straddle: https://en.wikipedia.org/wiki/Straddle#Short_straddle
Short strangle: https://en.wikipedia.org/wiki/Strangle_(options)#Short_strangle
Short ratio spread: https://en.wikipedia.org/wiki/Ratio_spread

How can I be short volatility on a stock without getting exposed to moves in the underlying?

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