advantage to selling options?

lol really? I was hoping that we could toy with you a bit longer. We haven't had any special ppl like you since marketsurfer.

 

The only thing more obnoxious is that she wasn't thrown in jail for that shit.

 

professionals buy options

 

Option theory with a lot of assumptions. Over enough repetitions, you would be indifferent. Sellers will be profitable more frequently, but have a limited return - buyers will be profitable less frequently, but occasionally make buckets of money. Change the parameters - have a good volatility forecast - adjust skew to balance your inventory - a whole series of issues can skew the decision making. The theoretical value of an option is an indifference price for the given inputs. MMs make a ton off of very small profits - reversing the b/a and a ton leverage. Fully hedged MM can get enormous leverage.
If you're going to do it once you have a bias - going to do it thousands of time and you become indifferent

 

Exactly. Options isn't the zero-sum game people make it out to be. People that buy them for insurance or hedging *expect* them to expire worthless, but want to have them around just in case. Their portfolio *benefits* from the option expiring worthless, because that means their primary strategy has worked out. If you write options, you provide that insurance.

 

Makes sense. I notice that a lot of the volume for SPX are for strikes ATM. Are these for leverage? I can picture far OTM strikes acting as insurance, but buying ATM strikes seems like a high price to pay for insurance.

 

@destriero - as usual, it's going to take me a while to parse what you wrote (usually resulting in a significant amount of learning, so it's not like I mind.) And thanks to a convo with @Wheezooo, I largely get how mark-to-market works - seeing this trade as a loss and the later trades I made as gains. What I don't get, other than as an accounting practice, is why I'd want to see it that way: without the position I was in as a result of those earlier trades, I couldn't have made those gains - right?

I also recall a position you had on where the price moved against you, and you - um, "fixed" it.

https://www.elitetrader.com/et/threads/dests-everything-journal.332136/page-28#post-4931400

Not arguing with your assertion, but I don't understand the difference between repairing a trade gone bad and the above.

 

Look at risk adjusted returns and Sharpe ratio.

 

I never adjusted/repaired the initial fly. I stated I was down 2% on net liq due to the fly. I held it.

 

Then I've totally misunderstood what you were describing in that post. Pardon me while I go pound my head against the wall.