"Selling anything but straddles is for pussies" Don Schlessinger.
Selling options to collect premium is clearly a tough business, but you should understand the theory. Every option is a "fair" bet - prices are distorted by skew and spreads, but I should view all options as equal bets - again skew and spreads distort this. Selling ATM is not a better or worse trade than selling and OTM. ATM has a higher premium commensurate to the fact that it requires more capital and a likely adjustment or closing trade.
Is selling X Delta superior to selling 3X Delta? Again given, skew, capital, and spreads the answer becomes distorted, but is basically no. Yes, I will trade less and take in less premium, but the probability change of being hit compensates for that.
I can make this a too-long post but understand the dynamics. A classic tale on the CBOE was the trader from a group who got fired after making some fabulous returns. Everyone focuses on success based on return and that's great, but very few are focus on themselves and what their return should have been. "I made a $million and they fired me. Why because they took $5million of risk.
"Selling anything but straddles is for pussies." Don ran options education at Morgan Stanley. He plays a lot of poker and has a book out on it. He can occasionally be heard on The Options Insider podcast. He is also a senior exec of the VOLX exchange.
Selling options to collect premium is clearly a tough business, but you should understand the theory. Every option is a "fair" bet - prices are distorted by skew and spreads, but I should view all options as equal bets - again skew and spreads distort this. Selling ATM is not a better or worse trade than selling and OTM. ATM has a higher premium commensurate to the fact that it requires more capital and a likely adjustment or closing trade.
Is selling X Delta superior to selling 3X Delta? Again given, skew, capital, and spreads the answer becomes distorted, but is basically no. Yes, I will trade less and take in less premium, but the probability change of being hit compensates for that.
I can make this a too-long post but understand the dynamics. A classic tale on the CBOE was the trader from a group who got fired after making some fabulous returns. Everyone focuses on success based on return and that's great, but very few are focus on themselves and what their return should have been. "I made a $million and they fired me. Why because they took $5million of risk.
"Selling anything but straddles is for pussies." Don ran options education at Morgan Stanley. He plays a lot of poker and has a book out on it. He can occasionally be heard on The Options Insider podcast. He is also a senior exec of the VOLX exchange.
