If you had to choose between VRP and TRP?

[traider]

There is still a risk premium, .80 is not nothing. Just don't think you can start selling 30 day straddles, have a mediocre hedging strategy, pay your taxes and walk away doing better than buy and hold the S&P.

If you were selling a variance swap you would do much better because its priced closer to a 90% moneyness strike. The problem with options is that you have gamma. So if you sell the 90% moneyness options you will realize most of your PnL (gamma gain/loss) when realized vol is greater than what was implied.

Thanks for all the thoughtful replies, really benefited a lot from your wisdom.
Do you know of any research / books that discuss how to implement different forms of delta hedging? Is there an optimal way of delta hedging?

 

[.sigma]

Thanks for all the thoughtful replies, really benefited a lot from your wisdom.
Do you know of any research / books that discuss how to implement different forms of delta hedging? Is there an optimal way of delta hedging?

Delta hedging is a myth... for the retail guys like us..

The best we can do is manage our deltas to match our bias.