Nothing wrong with what Vic was doing, he justhad no risk controls. Historically OTM (and ITM but to a lesser extent) put options on indices have had very consistent negative returns to holders. Writing them is not a bad gig if you aren't leveraged to the point Vic was.
I used to sell puts on the QQQ's and made $ on every trade. I've also bought puts on the Q's thinking I was timing a reversal and have lost $ on every trade over the last 5 years. Of course, we've been in the bull.
What no one has conceded yet is that the most important factor in an options price is the absolute level of the underlying, and not volatility. In other words, if buy low IV or sell high IV, if you get the direction of the underlying wrong, it will be extremely hard to make money with options. Escpecially true if you are a retail options trader, and use options for pure speculation.
I was doing my best to explain this was NOT true AT ALL if you are somewhat sophisticated about options.
It sounds like you think that selling high IV does not work because it did not work for you in this case. What makes you think that it does not work in the average case?
I hope you're not suggesting that retail traders start dynamically delta hedging their positions. They will lose so much money to spreads, slippage, and commission. Also you have to consider the possible expense of buying options software to track the delta of your position, and the time investment involved to do all the monitoring and trading.
Retail traders shouldn't be trading options in the first place; I somehow doubt the majority are using them for their real purpose (hedging)
as someone who has traded professionally (by the simple fact i had a options desk job in nyc) and now privately for over a decade; i can say vic imo had the premise correct. i have talked to hundreds of guys and really believe the only way to make a livable (as i do) income is shorting 10% otm indexes. of course my contract ratio to account size probably is smaller than vn and that is why i have survived 98, 2001, and this year (so far). this nonsense of selling the meat, and all really will bite you more often than my way. those who lose in my style, trade too many contracts, and do not manage the trying times properly, just as any insurance company that survives does it.
"It sounds like you think that selling high IV does not work because it did not work for you in this case. What makes you think that it does not work in the average case?" I really don't have enough historical info one way or another to make an intelligent comment. I'm only pointing out that high IV is high for a reason and the risk of getting reamed is higher selling high IV calls. In my case because the IV was so high, once I saw the trade go against me I bought the stock at a price lower than the total of the stock price and the premium I had received and made a profit on the position. But let's think like pros here with big accounts. We know if we sell a call, we will make $ 1. if the underlying stays flat, 2. goes up a little, 3. goes down a little 4. goes down alot. We only lose $ if 5. the underlying goes up alot. So the smart move for a long term trader is to avoid the one situation (#5 calls with high IV) ) that has the most chance of nailing us and put our $ into the situations that make us $ 4 out of 5 times.