nothing wrong with some cheap gamma

[.sigma]

Of all the threads about selling premium on elite trader, theres one caveat I never understood that the greats never addressed.

Whenever some duckling came along in the elite pond touting iron condors as income trades, the same group of peeps would heckle and claim its inevitable that the short premium theta gang trader will eventually implode his earnings in a cataclysmic event, like what we have just witnessed these past two months.

But what I don't understand is, whos to say that the selling premium guy has to be present in the market 24/7 to perpetuity? That was my thinking when reading the arguments against selling premo. That EVENTUALLY you'll blow the f up.. But you can only "blow" up if you size wrong and are ALWAYS in the market. But theres no rule, and one can liquidate whenever he chooses. So I'm I missing something about this argument and logic?

 

[Genevian Speculator]

well if you are not 100% of the time in the market, you should try buy and hold, the sp500 will probably do better in terms of performance

 

[.sigma]

You're saying a buy and hold will do better than say selling premium in the indices.

 

[Genevian Speculator]

yes if you imply losses, I am convinced SP500 does better in the long run

 

[MrMuppet]

Not a premium seller, so take with a grain of salt.
The ONLY reason why selling premium works is because of the risk premium that IV has over statistical volatility.

That's also the reason you'll find premo sellers only in the indices, not in commodities, individual equities or rates. Skew is always the same and IV is always a little bit higher than SV, period.

Premo sellers now try to capture this risk premium with more or less sophisticated models, but in order to capture it you have to be in the market all the time.

The problem is that in times of distress - like right now - the statistical volatility is higher than implied volatility....and that is the trade off.

So selling premium is a "win more" - strategy. You will have more consistent returns in good times, so you scale harder. But when correlations are 1 across the board, you also lose more...which doesn't matter because hopefully you already paid off your mortage from all those sweet management and performance fees you raked in over the last bull run.

 

[traider]

you can't compete with people like optionseller who used OPM to sell tons of naked. If they blow up they still walk away with millions.
Who is going to bail you out when your naked short fails?

 

[ffs1001]

That's also the reason you'll find premo sellers only in the indices, not in commodities, individual equities or rates.

Respectfully disagree. There are many retail traders who sell premia in commodities, myself included. But often, commodities crash upwards, rather than downwards (notwithstanding the recent /CL crash), so options sellers feel 'safer' selling puts in commodities rather than calls (the opposite of index based options).

 

[MrMuppet]

Respectfully disagree. There are many retail traders who sell premia in commodities, myself included. But often, commodities crash upwards, rather than downwards (notwithstanding the recent /CL crash), so options sellers feel 'safer' selling puts in commodities rather than calls (the opposite of index based options).

I did not have this on my radar tbh. On the other hand I have not seen any options income courses on stuff like oil or soybeans yet

 

[.sigma]

yes if you imply losses, I am convinced SP500 does better in the long run

What has convinced you of this? Just curious

 

[.sigma]

you can't compete with people like optionseller who used OPM to sell tons of naked. If they blow up they still walk away with millions.
Who is going to bail you out when your naked short fails?

I'm never naked short tho bro