Whilst we are looking at QAN as an example of the IV spread, the hassle with QAN is that its not really close to any particular expiry price (in fact its between 3.00 and 3.25), this clouds a few possible senarios.
I have noticed that the IV spreads are closing up today, but you never know when they will open up again, so I will continue to examine two of the likely candidates:
Straddle: on $3.25
Payoff diagram is below
Whilst the payoff diagram for the Calender spread is
Whilst the direct return for the straddle is larger so is the risk invloved with a sudden change (yo all remember the story about fat tails!).
As you can see I am risk adverse, but an interesting example for comparison.
