Credit Put Spread.. ATM vs OTM

[Herkfsu]

The exchange / MM work out the prices based on historical events and their algos. They can't just add an extra 3 points onto IV because otherwise the market will be against the MM when they get placed in a trade as a buyer.


I'm assuming that these 3 points are produced when the VIX is hitting 20-25 or so, you'd have to be the dumbest buyer out there to buy during this period.

Of course they aren't just adding 3 points. The risk premium works out that way. And no, the 3 points doesn't come from when the vix is high. If you read the paper I posted it comes from all levels of the vix.

 

[brucelevy]

Bro you need to get over to tastytrade and watch all the videos.

 

[CBC]

I'm not english teacher Herkfsu, but when I clicked on that paper the first thing I read what that I should be buying options in a low volatility market.

It seems to me that even your own link isn't backing up your post.

Normally the general idea is to give information that backs up what your posting / saying.

You've been posting that sellers win over long time and how to take advantage over that. Then the first thing I see in your link is that you should be buying options during low volatility.

#pullyouracttogether

 

[viruscore1]

I wish it is that simple.
Over a long period, stocks generally appreciate and it is a contest between time premium deterioration vs stocks appreciation. Do you know for sure which wins?

yes, i am not betting on hindsight like you. Place your trades moving forward and we'll compare results. Keep blue chips in mind, the closes thing to a guarantee is dividend, and option premiums from sell side. Everything else is a crap shoot. Give it some thought ...

 

[ironchef]

yes, i am not betting on hindsight like you. Place your trades moving forward and we'll compare results. Keep blue chips in mind, the closes thing to a guarantee is dividend, and option premiums from sell side. Everything else is a crap shoot. Give it some thought ...

Appreciate your comments.

I backtested a bunch of equities that I owned for a 20 years period. My benchmark is comparing buying and holding those securities.

I have been trading options full time since 2013 and I can only speak to my own records which indicated longs were better than shorts and buy-and-hold. I wrote calls and puts, bought calls and puts during those 4 years. In general, if I mechanically wrote calls and puts, I was not profitable. I was profitable writing only when I had some understanding of the situations. Of course 4 years is a very short time frame and I was probably lucky as during the past 4 years equities were generally up and I have not encountered a prolong bear market trading options as yet.

I am really puzzled as my own personal experience seemed to contradict convention views and wisdoms and I like to understand why.

Regards,

 

[viruscore1]

Appreciate your comments.
I backtested a bunch of equities that I owned for a 20 years period. My benchmark is comparing buying and holding those securities.
I have been trading options full time since 2013 and I can only speak to my own records which indicated longs were better than shorts and buy-and-hold. I wrote calls and puts, bought calls and puts during those 4 years. In general, if I mechanically wrote calls and puts, I was not profitable. I was profitable writing only when I had some understanding of the situations. Of course 4 years is a very short time frame and I was probably lucky as during the past 4 years equities were generally up and I have not encountered a prolong bear market trading options as yet.
I am really puzzled as my own personal experience seemed to contradict convention views and wisdoms and I like to understand why.
Regards,

It's interesting how many are profitable back testing. Try testing forward. I guess it wouldn't be test, real money would be at stake. Not knowing which direction the market is moving, place your trades and track them for 5 years. Winners and losers need to be noted in detail. I did this and I'll stick to my strategy and forget about all the noise ...

 

[Herkfsu]

I'm not english teacher Herkfsu, but when I clicked on that paper the first thing I read what that I should be buying options in a low volatility market.

It seems to me that even your own link isn't backing up your post.

Normally the general idea is to give information that backs up what your posting / saying.

You've been posting that sellers win over long time and how to take advantage over that. Then the first thing I see in your link is that you should be buying options during low volatility.

#pullyouracttogether

But do you know English at all? The title of the paper is..

Still Not Cheap: Portfolio Protection in Calm Markets

Did you read any of it?

 

[ironchef]

Try testing forward. I guess it wouldn't be test, real money would be at stake.

I have been trading with real money for 4 years testing both long and short options. So would that be your definition of testing forward?

 

[ironchef]

For whatever it is worth, the above chart compared IV vs historical volatility for SPY from August to today. It does not look to me that IV is always 3-4% higher than historical/realized volatility, at least for this year.

 

[viruscore1]

I have been trading with real money for 4 years testing both long and short options. So would that be your definition of testing forward?

Maybe your trading options with wrong strategy. Options are working for me, much better than buy and hold.