Options premium income. How much is too little?

[allamut2009]

Average premium income selling 1 month option on solid non volatile stocks is 1-2%. What is the point of this strategy if you can invest in T-Bills and get roughly the same amount of % with virtually no risk?

 

[just21]

In which universe do T-bills yield 12% a year?

 

[allamut2009]

In which universe do T-bills yield 12% a year?

1 month t bill ~1% no?

 

[just21]

You are saying that the yield on short stock options is 1% a month or per year?

 

[newwurldmn]

1 month t bill ~1% no?

that's annualized 1%.

 

[allamut2009]

You are saying that the yield on short stock options is 1% a month or per year?

1-2% a month depending on volatility levels of course but with super low vix you get very little.

 

[allamut2009]

that's annualized 1%.

Yield till maturity. No?

 

[just21]

Try short options on futures in your IB account. You can make 150% a year on premium to margin required.

 

[beerntrading]

There are so many dimensions to that question. If you're a market maker, even tiny premiums might make sense. As a retail investor however looking to turn 20% on a credit spread in a week is very possible.

It depends on what your strategy is and your risk tolerance.

Options are a really complex thing, and there's no such thing as a simple pre packaged answer.

 

[jjapp]

1%-2% is too little when it doesn't compensate you enough for the risk you're taking. If the market is priced correctly it should be a wash minus fees over the long term. If the market isn't priced correctly you must have some view on either direction or volatility.