Options are too expensive based on what facts? Incidentally history has shown that options are fairly priced expiration week and day.
Based on my p&L. Also based on the P&L of those that have traded in my group. Expiration day can be easy money, everyone who trades options everyday knows that. Of course there are times where it doesn't work out. If you don't think there is an advantage to trading high IV front month against back month, or selling strangles on stocks which you believe are in a range, you are missing the writing on the wall. Or perhaps better put, if you find short side edge, the returns are accelerated expiration week. I suppose the part missing in your argument is that I am assuming that your short positions have edge with regard to your take on IV and price movement. On average if you were to sell every option on every underlying, you will be up money. Only a small fraction of option expire in the money. By the way, I asked for selling ideas expiration week, not your opinion on the merits and disadvantages of a long theta strategy in said week. If you have no ideas to share, go express your opinions in another thread.
Sold 500 Vix Feb 30 Calls Friday and saturday for a average price of .15, covered with 26 call at ratio of 7 to 1.... will let 30's expire. Nice little score.
I am not really expressing opinions, I am just relaying facts. Your PnL or your groups PnL is irrelevant since we canât see your real time trades or true PnL. There is NO inherent edge in being a buyer or a sell of options, thatâs a well documented fact over time. The market over time prices options correctly and efficiently, particularly in this day and age. You appear to think there is an edge in selling high IV and in particular strangles, the problem is, in your own words itâs your âbeliefâ those stocks are in a range. There is no inherent edge in ones âbeliefâ, thatâs just a guess, or an opinion. Profits are not accelerated during expiration week, the rate of change in which the variables that are components of an options value change at a higher rate the closer you get to expiration, they MAY be connected to ones profit. Their rate of change is the correct rate of change for the time remaining in the life of the contract. To inexperienced options users they may assume its of some acceleration but the pricing models and the market insures thatâs the correct rate of change in the variables. You appear to imply that as those variables begin to change at a quicker pace that somehow there is an inherent edge in being a seller, thatâs simply not the mathematical, statistical or factual truth.
Hmm, so there is no inherent edge in buying or selling an option and there is no way to gain an edge through your own observations. how does one make money trading options? Are you saying this is a zero sum game? It seems to me that an experienced options trader realizes that theta decay and gamma or correlated so that in a way, the risk reward of any given position is uniform at any given time along the expiration cycle. However, if said trader knows how to manage that gamma risk as he tries to take advantage of "accelerating" theta decay as expiration approaches. now if you'll excuse me I have to manage my short aapl strangle as my p&L is rising by the hour. also, why in the world would I be worried about showing you my P&L. I know what it is and quite frankly who cares if you don't have proof. I'll say it one last time, contribute with an idea or go try to impress someone elsewhere. It certainly isn't working here. I was hoping to share short selling ideas in this thread in a constructive manner, not banter with some know-it-all who contributes nothing.
Well I am sorry if you donât care for the facts, for some reason they appear to upset you. No one said anything about a zero sum game. Experience is not an inherent edge, sorry but thatâs just a fact. Any trader, with any amount of experience can manage both long or short options which may result in a profit. Simply because you believe success lies in using options from the short side does not mean there is a statistical inherent edge in shorting options. As far as PnLâs go, youâre the only one who consistently feels the need to post over and over youâre making money. No one can see or verify what trades you make, have made or profited on. Yet, for some reason you feel the need to post over and over that youâre always making money. It really appears as if youâre trying to impress a totally anonymous group of forum users. Personally I find discussing, profits, losses, wealth or material goods on line to be an exercise in futility and I donât bother mentioning them, in a personal context. As far as contributions to the thread, thatâs a subjective issue. Youâre obviously content to believe that there is an inherent statistical edge in selling options in one time frame vs. another. The facts that I presented is that there is no inherent edge in selling or buying options and profits can be made on both sides under all time frames.
FWIW, I don't do stocks, but, in my mkt, I am always a buyer of cheap options arnd expiry, never a seller. My view is that while the mkt always prices the volatility of the underlying asset fairly, nobody's figured out a way to properly price liquidity. I would always, for choice, be long a liquidity option, rather than short.
That is an interesting point. Moreover, owning a cheap option at a nickel or dime at expiry, you would benefit form a mm "fade" should the underlying move sharply in the direction of that strike. There is something to be said for that, I certainly agree. I usually don't touch options that cheap on expiration, personally, unless the vol skew has very fat tails, like in the VIX.
But then I don't understand what you're trying to do... Correct me if I am wrong here, but you like selling options, because you think the mkt misprices the asset volatility arnd expiry? But, like myself, you also like buying options because the mkt misprices the liquidity component of the premium? Does this imply that you'd be a fan of some variant of an ATM vs wings thang (iron flies, etc)? I'm all confused... Have to leave for now and go drink something strong and alcoholic to clear my head .