High theta ahead of central bank announcements

The steep market decline two Fridays ago and the increase in volatility that accompanied it provided an opportunity to aggressively sell premium in the E-mini S&P futures (ES).  The notional value of the ES is the equivalent of 500 shares of SPY.  I like using the ES for a couple of reasons.  The essentially trades 24/5.  It closes between 4:15 pm to 4:30 pm and from 5:00 pm to 6:00 pm (EST).  This allows me to monitor my delta (if necessary) if there is a large after-hours move in the market (eg. Brexit) when the markets are closed.  The size of the ES and the transaction costs are also more favourable.  These attributes along with the extremely high liquidity are why the ES and its options make up a good part of my portfolio.

The ES premium I sold over earlier in the month had expiries of September 23 and September 30.  We are now in the week of the 23^rd and IV is relatively high in these weekly contracts as we await central bank policy announcements from not one, not two, but three central banks.  The Bank of Japan kicks things off tonight, the Fed is scheduled for tomorrow and the European Central Bank closes things off on Thursday (although the ECB won't be addressing policy at its event).  It will be an interesting 48 hours.  As a result of the increasing IV, theta drip has been slow to roll off of my short options and theta has ramped up.  My theta numbers are about double where they were two weeks ago.  The conservative approach would be to reduce some positions and bring down theta/gamma or extend duration which would also reduce theta/gamma.  However, I feel the volatility crush will be significant over the next two and a half days and irrespective of the direction of the market, I’ll be in a good place (barring a 300+ move in the DOW).  I feel the risk to the downside is greater than the risk to the upside so I’m positioning my deltas slightly negative because any upward movement in the market will accentuate the volatility crush.