Im looking at historical option quotes right now and even after large moves the option doesn't appreciate as much as the SPY trade I did. The stock CSII dropped 29.86% from 12.46 jan 21 to 8.74 jan 22. You could buy a Feb10 put for 0.55 and the following day it would only be worth 2.20 ? I would have expect it to go way higher since a 30% single day move is a huge unexpected event in a market.
I don't use options on individual stocks , only on QQQ, IWM,USO & SPY. But let's take a look at your example. My math may be wrong, but oh well. This option trade would have had a 300% gain ($1.65) overnight, you could have avoided the pattern day trading rule by holding it overnight. You wouldn't have had the exposure of holding the trade position overnight.
I don't know of a single buyer of vol who makes money solely on that. There are many examples of firms, desks, and traders who lean long vol but they have other sources of alpha to pay for it. Even universa recommends that strategy. Have some alpha produc No strategy and give them 4percent of the gains to buy convexity.
...That book...it says Black Swan and shows a Penguin. 'You look for the birds...they're gonna help you. those birds. you'll see. Good luck" --Eli Wallach, Wall Street Money Never Sleeps [2010] movie
Here's a sell premium trade I've been in for a few months, deep OTM at the time. Sold 1 SPX 2500 Call OTM @ 2500. Covered it with a Long 3000 Call for insurance. I normally trade more contracts but was able to still make a reasonable gain on 1 contract. Tastytrade does have good resources. Nassim is right about black swans, always consider if you are comfortable taking your largest loss in a black swan event... It should always be factored into every option trade. +1 SPX Dec16 3000 Call S&P 500 INDEX $1,906.90 Loss -$225.00 -1 SPX Dec16 2500 Call S&P 500 INDEX $1,906.90 Gain $3,050.00
it took me a few years, but i made [almost] 10x, buying [and selling] options you do have to risk some money, to make it grow marc