Writing options for a living

Quote from Maverick74:

No, but everyone asks me that. Those Gray's own a piece of Options Express now.
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"Those" Gray's will never need work another day in their life. Mucho, mucho, mucho dinero from Option Express's public offering..........
 
Quote from riskarb:

On the order of $800mil in OX I believe
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We're in the wrong end of the business, bro. When VT goes public we'll be shining Mav's fleet of poloponys.
 
Quote from Pabst:

We're in the wrong end of the business, bro. When VT goes public we'll be shining Mav's fleet of poloponys.
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Does Mav own a piece of the rock?
 
Quote from Maverick74:

You obviously do not understand a single thing about the greeks. Theta is not an edge. It's a function of volatility. Volatility is a function of delta. Delta is a function of price. The delta of any given option is priced very efficiently as to not favor the buyer or the seller.

If what you are saying is true. One could trade synthetics to make millions. What you are saying is that selling a 20 delta option has some sort of implicit edge. That would mean one could sell any given option and buy it's synthetic counterpart for a risk free profit. Obviously if you understand put-to-call parity, you would know this is not possible.
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While I agree that Theta is not an edge. I do not believe your statement that "the delta of any given option is priced very efficiently as to not favor the buyer or the seller" is correct.

Specifically, I believe that the price of low delta options are heavily skewed in favor of the buyer. If an option has a delta of 1 - then it is defined as having a 1% chance of settling ITM. Right now you can probably buy a 1% delta put in the S&P's for .10. I believe this premium dramatically understates the value of this put. Put another way, I do not think that .10 adequately compensates the writer of this option for the risk he is assuming.

We are one Long-Term Capital, 9/11, Bird Flu epidemic, successful attack on our food supply, etc. away from a catastrophic and discontinuous break in the markets.

If one of these, or any other, "once in a lifetime" event occurs, that put might be 100 points in the money with volatility moving to 35% over the course of 1 hour with no opportunity for the writer to cover.

So when you say that the price of an option does not favor either the buyer or the seller, I would have to respectfully disagree.
 
Quote from tower:

While I agree that Theta is not an edge. I do not believe your statement that "the delta of any given option is priced very efficiently as to not favor the buyer or the seller" is correct.

Specifically, I believe that the price of low delta options are heavily skewed in favor of the buyer. If an option has a delta of 1 - then it is defined as having a 1% chance of settling ITM. Right now you can probably buy a 1% delta put in the S&P's for .10. I believe this premium dramatically understates the value of this put. Put another way, I do not think that .10 adequately compensates the writer of this option for the risk he is assuming.

We are one Long-Term Capital, 9/11, Bird Flu epidemic, successful attack on our food supply, etc. away from a catastrophic and discontinuous break in the markets.

If one of these, or any other, "once in a lifetime" event occurs, that put might be 100 points in the money with volatility moving to 35% over the course of 1 hour with no opportunity for the writer to cover.

So when you say that the price of an option does not favor either the buyer or the seller, I would have to respectfully disagree.
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This is Nassem Taleb's Black Swan theory. The question is whether you will live long enough to see a black swan. The edge, if it exists, is tiny and there is a big difference in identifying a statistical anomaly and making money off it.
 
Quote from tower:

While I agree that Theta is not an edge. I do not believe your statement that "the delta of any given option is priced very efficiently as to not favor the buyer or the seller" is correct.

Specifically, I believe that the price of low delta options are heavily skewed in favor of the buyer. If an option has a delta of 1 - then it is defined as having a 1% chance of settling ITM. Right now you can probably buy a 1% delta put in the S&P's for .10. I believe this premium dramatically understates the value of this put. Put another way, I do not think that .10 adequately compensates the writer of this option for the risk he is assuming.

We are one Long-Term Capital, 9/11, Bird Flu epidemic, successful attack on our food supply, etc. away from a catastrophic and discontinuous break in the markets.

If one of these, or any other, "once in a lifetime" event occurs, that put might be 100 points in the money with volatility moving to 35% over the course of 1 hour with no opportunity for the writer to cover.

So when you say that the price of an option does not favor either the buyer or the seller, I would have to respectfully disagree.
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excellent post , you should re post it here :

http://www.elitetrader.com/vb/showthread.php?s=&threadid=49586&perpage=6&pagenumber=1853

Notice that this thread has all ET records ( # of views , pages , replies) , so I guess a lot of people here would disagree with you :)

BTW , do you have any opinion on Reverse Calendars ( one day position , into qtr report/events ) ? This is one of my favor strategies (on the certain stocks , of course) , but there is not so much info on this subject on ET , only a few good posts from Maverick74 from a long time ago.
 
Quote from IV_Trader:

Notice that this thread has all ET records ( # of views , pages , replies) , so I guess a lot of people here would disagree with you :)
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IV, don't you get tired of bashing the folks on the SPX credit spread thread LOL?

Black swan risk is discussed regularly on that thread; they are not ignorant of the dangers but prefer to take their chances...and the money, 90% of the time.

Die thread die. I think Tower is on a mission to revive hundreds of old threads.
 
Quote from momoneythansens:

IV, don't you get tired of bashing the folks on the SPX credit spread thread LOL?

Black swan risk is discussed regularly on that thread; they are not ignorant of the dangers but prefer to take their chances...and the money, 90% of the time.

Die thread die. I think Tower is on a mission to revive hundreds of old threads.
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lol , Mo . Yes , its a dirty job , but somebody must do it :)
The 25:1 r/r ( also add a few SD) , means that you can be right/take money for a long long time , until you don't.


hmmm , why are you so afraid to revive the old threads , what are you hiding , MO ???
:)
 
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