Selling puts on ETFs

N

nycabs

Do you guys think that some of the OTM put options on commodities ETFs (e.g. USO) are overvalued?

It is a norm to observe pronounced volatility skew on stock put options (more OTM = higher IV) due to demand for protection against black swan fat-tail events. But for commodities ETF??? if anything with commodities, the risk-aversion of most trader is against the upside risk.

Selling OTM puts on commodities seemed to provide a decent risk/reward proposition. Am I missing something here?
 
You should stick to writing puts on something you are willing to own but at a lower price and would like to be compensated for waiting.

Why not write puts on SPY instead? pick a point you feel comfortable taking a position in SPY and write puts on that.
 
Quote from dcvtss:

That's interesting, which commodities ETF's are you observing skew on?
More...

NYSE: USO.

Let's take June put chain:

31 strike: Imp Vol = 45.76
30 strike: Imp Vol = 47.08
29 strike: Imp Vol = 47.73
28 strike: Imp Vol = 48.64
27 strike: Imp Vol = 50.10
26 strike: Imp Vol = 50.52

Imp Vol provided by optionxpress. The skew is quite pronounced.
 
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