Option selling. Too good to continue?

[taowave]

35k in margin will afford you the luxury of selling apx 10> 51dte >0.10 delta puts..
You would be short the 91% of spot put,taking in apx 1.10 per option,for a total credit of 11 bucks..

11 dollars in premium on a 321.86 index is a 3.42% return would annualize to apx 24% assuming you collected the full premium each month..

The catch is you are short 10 >0.10 delta puts on a 100k account,which would be 294k if assigned on the short puts.Compare that to having the equivalent delta of 100 shares in the SPY,you would only be long 32k of SPY...

The puts you are short are the 91 percent of spot,only 9 percent OTM..You really want to get long 3x your bank on a 9 percent move down??? Vol is way too cheap..And I know you will manage your position,but I dont see any edge in selling 10 >91% spot puts in the SPY vs buying 100 shares..

Not saying you will blow up,but you could easily give away the year if you arent exceedingly disciplined....and lucky

Most people responding to you have never sold a put and don't have the balls to. Selling 10 delta puts at 60 days to expiration, then managing the trade at 40% maximum profit or closing the trade with 3 weeks remaining in the trade will work extraordinarily well. Try to use no more than 35% of your buying power. So if you have a $100k account, use no more than $35k for this strategy. Size is what kills when you are a put seller. Maintain your size and you will outperform the morons responding to you who simply don't have a clue.

 

[Wheezooo]

Why would someone write a contract with an expected value of 0? Given the imbalance of hedgers vs speculators in OTM puts I dont think I need to get into the implied vs realized distribution to prove that systematically selling OTM puts (especially index) has a positive expected value.

There have been a lot of papers written on the variance risk premium

Yep, you just keep stickin' to those academic papers. Like you once said, I'm just an angry failed vol trader. Ignore me.

 

[drcruz]

Why would someone write a contract with an expected value of 0? Given the imbalance of hedgers vs speculators in OTM puts I dont think I need to get into the implied vs realized distribution to prove that systematically selling OTM puts (especially index) has a positive expected value.

There have been a lot of papers written on the variance risk premium

I'm also betting on positive market drift over time and put skew

 

[drcruz]

Yep, you just keep stickin' to those academic papers. Like you once said, I'm just an angry failed vol trader. Ignore me.

Me too, BIG loss Feb. 2018.

 

[taowave]

So you are saying regardless of the level of implied vol, one is better off selling 10 > Delta .10 puts than buying 100 shares in the index??

Why would someone write a contract with an expected value of 0? Given the imbalance of hedgers vs speculators in OTM puts I dont think I need to get into the implied vs realized distribution to prove that systematically selling OTM puts (especially index) has a positive expected value.

There have been a lot of papers written on the variance risk premium

 

[Wheezooo]

Oops, I skimmed too quickly - okay, I'm not worthy

...and my apologies. I have no reason to assume you were trolling, and including you with Bobby and Draft in my above comment, was inappropriate.

 

[TheBigShort]

So you are saying regardless of the level of implied vol, one is better off selling 10 > Delta .10 puts than buying 100 shares in the index??

No. I'm saying selling puts systematically has a positive expected value.

Yep, you just keep stickin' to those academic papers. Like you once said, I'm just an angry failed vol trader. Ignore me.

Academic papers are a great source for idea generation. It does not take much brains to realize that implied on average over states realized and that skew is systematically over priced.

 

[drcruz]

...and my apologies. I have no reason to assume you were trolling, and including you in my above comment was inappropriate.

I work with a lot of ex-military and I say, "if I didn't want any crap, I wouldn't be here." No worries

 

[Wheezooo]

No. I'm saying selling puts systematically has a positive expected value.


Academic papers are a great source for idea generation. It does not take much brains to realize that implied on average over states realized and that skew is systematically over priced.

Once again, thank you for incisively illustrating my shortcoming. I only wish I had known this sooner, and could therefore have entered into a different field.

 

[traider]

No. I'm saying selling puts systematically has a positive expected value.


Academic papers are a great source for idea generation. It does not take much brains to realize that implied on average over states realized and that skew is systematically over priced.

Is ATM also overpriced? Or only OTM