One of us is thinking about implied volatility wrong. My understanding is that it's not a measure of actual volatility, of either the underlying security or the option itself. Rather, it's a measure of how much the price reflects expected volatility in the underlying security. So in a security with ultra-low expected volatility (IV), options that are far out of the money will have much lower premiums than those where high volatility is expected in the underlying security.
In this way, the poster you're replying to is right. The reason premiums were so low was that IV was so low, but that was because no one expected the S&P 500 to drop from 3350 to 2750 in a few weeks. The IV is pretty high now, but it's still bouncing around much more than the actual volatility of the SPY index itself. I've seen everything from 30-150% over the past few weeks.
It’s not optimism that stocks will only go up, but it’s optimism that they won’t suddenly go up or down by too much, which is generally to be avoided unless you’re a trader.
Right, but “not go up too much” isn’t really the normal definition of optimism when it comes to the market. If it was, an even lower implied volatility on a flat market would be irrational exuberance!
In this way, the poster you're replying to is right. The reason premiums were so low was that IV was so low, but that was because no one expected the S&P 500 to drop from 3350 to 2750 in a few weeks. The IV is pretty high now, but it's still bouncing around much more than the actual volatility of the SPY index itself. I've seen everything from 30-150% over the past few weeks.