short straddle in highly volatile, but oscilating market

CFA Level III
#1

short straddle payoff is a pyramid.

Scenerio 1.

if investor has a short straddle position, and he expects market to stay around the same level and low volatility, he will make a profit.

scenerio 2.

same investor, same position. Market is really volatile, big up and down swings, but mean reverting. Is short straddle still recommended?

This is a made up question

#2

I would use a short straddle or long butterfly in low volatility environemnt while using long straddle in directionless big swing environment.

#3

I think scenario 2 would be risky because you wouldn’t have control of whether the market was inside your narrow band of profitable payoffs at the time of expiration.

you might only use it if you do not plan on holding the options to expiration. maybe the market swings down first and you unwind only the put, then when market swings up you unwind the call. just a thought.