I too have often done the same, on similar stocks, with good results. My short option positions are usually small, always cash secured, never on leverage!, and if I want to take a large position I will buy a strike further out as a hedge to cap potential loss. I won't take a large position naked, i.e. unhedged. Mr. Niedermeyer is an expert on what can happen to your money, or your clients in his case, if you use leverage, or are unhedged selling large amounts of premium.
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Anyone selling premium only
- Thread starter optionbull
- Start date
I too have often done the same, on similar stocks, with good results. My short option positions are usually small, always cash secured, never on leverage!, and if I want to take a large position I will buy a strike further out as a hedge to cap potential loss. I won't take a large position naked, i.e. unhedged. Mr. Niedermeyer is an expert on what can happen to your money, or your clients in his case, if you use leverage, or are unhedged selling large amounts of premium.
Quote from froluis:
But when I sell put naked and roll or short VIX futures and roll, I guess I am betting on the fact that SPX options are overpriced?
You are also betting, whether you realize it or not, that a plane won't fly into the White House, or into the New Orleans Superdome during the super bowl, etc. If you sell a put naked, make sure your account can survive and recover from a -3s + event. Never lose sight of the reality that the probability of these events is far higher than would be predicted from a Gaussian distribution of market excursions. That is to say, the distribution has "fat tails".
its always better to start short premium strats on the index when the vix is greater then 12.. haha.... i'm confused as to why one wouldn't think to figure out ways to go long in this environment...
heres a question...
are butterfly's better off generally when skew is relatively lower, and vol for that matter.. and condors credit spreads when the opposite? is that not somewhat of a true statement.. of course there are other considerations..
heres a question...
are butterfly's better off generally when skew is relatively lower, and vol for that matter.. and condors credit spreads when the opposite? is that not somewhat of a true statement.. of course there are other considerations..
Quote from cdcaveman:
its always better to start short premium strats on the index when the vix is greater then 12.. haha.... i'm confused as to why one wouldn't think to figure out ways to go long in this environment...
heres a question...
are butterfly's better off generally when skew is relatively lower, and vol for that matter.. and condors credit spreads when the opposite? is that not somewhat of a true statement.. of course there are other considerations..
great question with VIX low, what can one do until it begins to pick up without risking "it all"
And what is "low" ??
thnx
Quote from froluis:
Thanks Piezoe, I am just trying to determine if there is more edge in shorting SPX put or VIX futures but you are right, after that, I have to see how to hedge the tail or limit exposure. Regards
A little late to the discussion, but there is no edge in selling VIX here. The proverbial blood from a stone and the curve is nearly flat. Honestly, I thought your question was a joke.
Quote from piezoe:
You are also betting, whether you realize it or not, that a plane won't fly into the White House, or into the New Orleans Superdome during the super bowl, etc. If you sell a put naked, make sure your account can survive and recover from a -3s + event. Never lose sight of the reality that the probability of these events is far higher than would be predicted from a Gaussian distribution of market excursions. That is to say, the distribution has "fat tails".
But it's not the vol, it's the gamma and speed. Are you better off long 10 ES or short 10 of the 30D puts in either scenario? Trading involves risk. You can be in HFT and get caught long into a dirty nuke.
If you're short equivalent deltas in both you will no doubt lose more in the puts.
Your edge in those puts is currently 400bp over ATM. If ATM vol is the best predictor of realized then you will win. The edge is persistent in index as the tail risk is asymmetrical. The put seller may be hedging dynamically and have an edge in that space as well.
The "underwriting" argument is pointless.
Quote from optionbull:
great question with VIX low, what can one do until it begins to pick up without risking "it all"
And what is "low" ??
thnx
buy puts in highly correlated names.. buy the idiosyncratic risk as SLE puts it..
sucks you can't scan for single names by relative value.. most scans are like "lowest vol" or highest vol" kind of thing.. i'd be looking for lowest relative to something.. like a Garch number..
Quote from cdcaveman:
heres a question...
are butterfly's better off generally when skew is relatively lower, and vol for that matter.. and condors credit spreads when the opposite? is that not somewhat of a true statement.. of course there are other considerations..
I, as well, would like to know when a condor is preferable to a butterfly? I would think that both benefit from decreasing IV and low skew. what are the other considerations? Never traded a condor