mark this is untrue. Your statement is implying risk premium is overpriced and besides that, the market is 100% efficient. There are quite a few rocks to turn over if you are managing under 500k in the options market. + risk premium on certain assets is not always over priced. I would also mention a butterfly is short vol and is pretty easy on margin. So if your theory is correct (risk premium is always overpriced), why could you not trade butterfly's for a profit?
Struggle to profit from buying options here. In theory I ubderstand it's time to buy when you'd bet on direction of an underlying plus IV of a chosen option is low. Still hard to turn it into money.
Still waiting for someone on this forum to provide more details on strategies worth pursuing, but all I keep seeing is far from it. Plenty of time and effort is spent on disagreeing with each other which in itself brings no harm as long as some positives can be identified.
(a) stuff that works is difficult to find and stuff that is known to everyone stops working (b) because of (a) nobody in the right mind would share anything beyond truisms (c) due to (a) and (b), be afraid of any pearls of wisdom that are shared voluntarily (d) to avoid (a), (b) and (c), find an experienced vol trader and waterboard him/her
What about systematically short gamma in various diversified etfs? This is a known strategy that works if you can keep your overhead low and be smart about leverage. In my opinion, retail traders are in the best position to be providing liquidity for short dated options. What are your opinions?
1. You have leeway with your daily PnL ( no need to mark to market, a few % down in a day wont get you fired) 2. As you mentioned, much smaller capacity can move in and out of short dated options relatively quickly and efficiently. 3. No regulatory/investor pressure. However the commission structure for retail is much higher(over head). But if you could keep that relatively low, and have some experience with order execution. I think it's a great trade for retail. I was looking at one Canadian etf yesterday that over the past 2 years on average had a 16% implied(1 month ATM)/realized premium. The product only trades 500 contracts a day.