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Isn't the difference that VN sells naked, no hedge. I'm proposing hedging and expecting that while adjustments with underlying will lose money, net position at expiry will be positive.

If you "knew" the future stat vol for the spot was going to be less than the ATM implieds were telling you when the trade was put on, then shorting the ATM put, keeping delta neutral with the underlying ("frequently enough") and guiding the trade through to expiration should yield a profit. Why...

Wouldn't there be an inherent edge to shorting OTM puts and keeping delta neutral with underlying? If ATM implied is best guess for forward stat vol, then this seems a case of "overvalued" options. For the SPX, 20d puts implieds are ~ 500bp > than ATM. Comments?

rdemyan: Yes, I'm thinking of the actual iv for each strike calculated. Of course, you'd have to make some estimate, but it seems possible if done in excel. For example, the short put has a lower iv and the long put a higher iv relative to each other when the spread is initially placed. If...

rdemyan: What would the curves look like if the skew was taken into account instead of using constant vol?

Choad, Great data. Where did you download the information on the SPX?

For a systematic writing plan, I've been looking at the SPX because I like the idea of European exercise and cash settle, but I've heard that this index is a killer for the routine retail trader because of the bid-ask. Is this true in practice? If so, what other index with European-style...