How legit is options selling?

[nooby_mcnoob]

Let's say the thesis is that implied volatility is usually over-estimated compared to realized volatility, thus leading to over-priced options. If this is the case 60% of the time, and you sell risk-limited options at strikes outside 1 standard deviation, it seems like a no brainer, similar to how insurance companies work.

If you can do this and make a 10% return, this can (in theory) be automated, which is really all I'm looking for.

Seems like bullshit. Something that low effort can't be possible.

 

[TheBigShort]

implied volatility is usually over-estimated compared to realized volatility

You have to delta hedge to realize the implied/realized premium. This comes with transaction costs and path dependency (not so easy anymore). Otherwise your taking a bet on the terminal distribution. In many cases the index can drift with low volatility far far beyond your upside strike. Systematically selling near dated puts with small amounts of leverage has historically achieved those returns, but the drift component plays an important part.

 

[nooby_mcnoob]

You have to delta hedge to realize the implied/realized premium. This comes with transaction costs and path dependency (not so easy anymore). Otherwise your taking a bet on the terminal distribution. In many cases the index can drift with low volatility far far beyond your upside strike. Systematically selling near dated puts with small amounts of leverage has historically achieved those returns, but the drift component plays an important part.

What do you mean by terminal distribution? I've seen the drift component take me out a couple of times.

 

[Option_Attack]

"Risk-Limited" short options?

Monthly ATM calls I think, but here is what you get with BXM, Buy-Write Index, but it's of course a cov call strategy:

 

[nooby_mcnoob]

Risk-Limited" short options?

Put/call spreads for example. Maybe I should use different terminology?

 

[newwurldmn]

Let's say the thesis is that implied volatility is usually over-estimated compared to realized volatility, thus leading to over-priced options. If this is the case 60% of the time, and you sell risk-limited options at strikes outside 1 standard deviation, it seems like a no brainer, similar to how insurance companies work.

If you can do this and make a 10% return, this can (in theory) be automated, which is really all I'm looking for.

Seems like bullshit. Something that low effort can't be possible.

It's not a no brainer. 60% win rates and 40% loss rates but you lose 2x what you win.

It can be automated.

 

[smallfil]

Let's say the thesis is that implied volatility is usually over-estimated compared to realized volatility, thus leading to over-priced options. If this is the case 60% of the time, and you sell risk-limited options at strikes outside 1 standard deviation, it seems like a no brainer, similar to how insurance companies work.

If you can do this and make a 10% return, this can (in theory) be automated, which is really all I'm looking for.

Seems like bullshit. Something that low effort can't be possible.

I think there is a lot of BS as far as selling options for premium. Do not take my word for it and I backtested manually, stocks trending in one direction. Implied volatility at times would rise maybe, 1-2% yet, the options premium was moving $2-4 dollars upwards. So, the premiums were rising by a huge amount yet, the implied volatility was practically, static? Remember what a lot of experts tell you to sell options for premium when implied volatility is at the highest. If that is the case, it is quite possible, you would be selling premium when the options premiums could be lower. What happens if it then, runs up since, implied volatility is rising? You would be suffering huge losses in short order? Just because some hacks and trolls say something doesn't make it true!

 

[2rosy]

Let's say the thesis is that implied volatility is usually over-estimated compared to realized volatility, thus leading to over-priced options. If this is the case 60% of the time, and you sell risk-limited options at strikes outside 1 standard deviation, it seems like a no brainer, similar to how insurance companies work.

If you can do this and make a 10% return, this can (in theory) be automated, which is really all I'm looking for.

Seems like bullshit. Something that low effort can't be possible.

maybe can sell an index strangle and buy a variance swap

 

[El OchoCinco]

Let's say the thesis is that implied volatility is usually over-estimated compared to realized volatility, thus leading to over-priced options. If this is the case 60% of the time, and you sell risk-limited options at strikes outside 1 standard deviation, it seems like a no brainer, similar to how insurance companies work.

If you can do this and make a 10% return, this can (in theory) be automated, which is really all I'm looking for.

Seems like bullshit. Something that low effort can't be possible.

Les riskier ways to make 10% return or you are not doing it right if only making 10% based on leverage.

 

[nooby_mcnoob]

Les riskier ways to make 10% return or you are not doing it right if only making 10% based on leverage.

Enlighten me!