Its a good question as to where the 90% number comes from...It seems that it is just a convenient number, but nothing much more than that...
Someone once mentioned, that it might be possible that a number such as this could be true for OTM options, but that this is irrelevant because the "drift" between strikes during an expiration cycle will likely negate any benefit from the fact that some arbitrary percentage of options MAY, in fact, expire worthless...
After all, there is little comfort to be taken in selling calls or puts for 5 bucks watching them go to 15 then saying to yourself "well, 90% expire worthless"...In any event, the position will have to be adjusted because there are enough situations where the "flyer" puts or calls that seem like a great sell become the "outlier"...
Gallacher discusses this theory of 90% in one of his books...But it has been about 3 years since I read it, so I dont remember his final conclusion...
Someone once mentioned, that it might be possible that a number such as this could be true for OTM options, but that this is irrelevant because the "drift" between strikes during an expiration cycle will likely negate any benefit from the fact that some arbitrary percentage of options MAY, in fact, expire worthless...
After all, there is little comfort to be taken in selling calls or puts for 5 bucks watching them go to 15 then saying to yourself "well, 90% expire worthless"...In any event, the position will have to be adjusted because there are enough situations where the "flyer" puts or calls that seem like a great sell become the "outlier"...
Gallacher discusses this theory of 90% in one of his books...But it has been about 3 years since I read it, so I dont remember his final conclusion...