In picking a hedge option, how important is it to buy one where the implied volatility isn't much higher than actual market volatility? Should one look at the option chain and find those options that have the best price in terms of implied volatility vs. actual volatility, and if need be, just buy a different number / ratio of options with the lowest implied volatility? I know this has its limits, as the delta values of the put options will be different, but just generally speaking, is there guidance/thoughts someone can provide here?
As a concrete example, with GLD currently 166, I'm looking to
- hedge a 145 Call (March option, currently 3.5 months out)
- this call is used to sell weekly calls against (vs. owning the underlying security)
There are various choices in picking a put option to hedge this call against, should GLD drop. Given the best time to enter this trade is when volatility (and ideally implied volatility) is at a relative low point overall, what additional put option characteristics might I look at in determining which option to pick, if I am free to use any number/ratio of put options against the $145 call?