I agree with this but you could change the numbers even further. Even if you have a -expectancy you can extract alpha. This is why risk management and position sizing is more important than the strategy implemented. Yet they are both of importance to me. The r:r can be below 50/50
Yes, it's my opinion that normal distribution doesn't apply to volatility in practical sense because the risk of blow up is too high to put any real size on (relative to the portfolio size). So people who sell premium at retail level are dickering around with no edge whatsoever other than placing directional bets, imho. In my mind, it's all "directional" You are betting that price trends horizontally instead of up/down in the case of IC for example. Same with volatility, you will profit if it shrinks or expands. Same with time, that it shrinks before price moves. So you can isolate the Greek of your choice, but it has to change somehow for you to profit. Now, what gives you the edge in making this prediction? I understand so little about options that the only reason I post about them is to keep the conversation going. Hopefully, it will lead to some insights from others (I really hope it doesn't distract instead!). I see lots of comments from very well read people which sound very smart and risk aware. I have yet to understand what gives them the edge trading options specifically.
@qlai, with all due respect - I'm afraid that literally every statement that you made about options in your last response is either a non-sequitur, irrelevant, lacking in understanding of the subject, or simply wrong. There's nothing there that I can address; you lack the basic understanding that would be necessary for any sort of meaningful discussion about it. I'm going to wish you a pleasant evening and leave this conversation.
Selling a vertical or atm straddle with ~30 days to expiration is an option trade in the Gamma sector: --- Without delta hedging, one is exposed to the payoff profile of option at expiry (overall move of the underlying) --- With delta hedging, one is exposed to continuous realized volatility of the underlying (and unaffected by the overall move of the underlying and its price at expiry). Implied volatility only matters at the beginnings. Afterwards, performance only depends on realized volatility, not on changes to the implied volatility. In the Vega sector (leaps options), impact from the moves in the underlying is minimized thus realized volatility is largely excluded; one obtains a pure exposure to implied volatility. Straddles are unwound well before expiry.
@Philo Beddoe "risk management and position sizing" B isn't a subset of A? ...Ask me what makes a great trader, and without hesitation, my answer will always be "great risk management skills." ...You never responded to my question when I asked if the Fisher that taught you was the same as MBF Clearing. I won't pry further, just curious.
For some of us amateur retails, our edge is "luck". If you trade options starting in 2009 and your strategy has a directional up bias, if you are persistent and consistent enough to stick it out all these years, you will be very profitable. You think you found an edge. In reality you just confused the bull market with your skill.
Exactly! Selling premium with delta neutral trades, at least the way it is taught by most online outfits, is like buying pull backs in a bull market (or playing mean reversion in a sideways market) only much much riskier. Yes, the probabilities are on your side, but what edge do you have other than that? And as @Wheezooo said, you get what you pay for. I don't think I need to be an expert in options to see that most of what is being taught has no edge. I haven't seen anyone as yet explain to me in layman's terms what their edge is conceptually. The only edge I see is being able to predict the direction of the underlying. But I would appreciate someone dispute this.
"I watched Mark Fisher's ACD videos on youtube, thats all" Thanks, I just went to search for it. There are, as well, 2-3 videos of him being interviewed by some insanely smoking hot chick. So I keep watching that instead.