as a former mm, the msft 2/3 call spread does look like the kind of money maker that we should all be doing. Unfortunately, this market has had no remorse on short gamma. I would put this spread on with msft at 50 and unwind at 55 just to trade the deltas. At the money put spreads have seemed to have been working. As long as you trade the deltas, they have been champs as leaning into the skew is one of my favorite trades. In regards to the other gentlemen's idea of selling the premium, maybe calendar spreads would be better since long gamma short vega seems to be ok also.
buying 2 lower strike calls and selling 3 higher strike against. 2 by 3 (or aka 1 by 1 and a 1/2 ratio).
Most people don't have the cajones to sell naked options. If your clients have those convictions, then good luck. The problem is the risk/reward of selling options is not a high probability event relative to the capital. IRR's(internal rate of returns) of spreads are better.
if you buy 2 and sell 3 its also called a ratio write. You are correct that one of them is naked, but the position taken as a whole is partially hedged, so the risk is somewhat less than just selling one contract naked. Personally, I don't think it takes cajones to go around selling naked options, but a lack of concern for risk. Ever heard of Victor Niederhoffer? That is what killed him. Twice.
Don't get me wrong, I love selling options. You just have to sell them when they are being bought by the truckload. V.N. thinks he is smarter than the world that is why he has blown up twice. Most successful traders will tell you that the market is all knowing. A good trader has to take what the market is giving. As one of my old partners used to say: "A bad sale is better than an expensive buy. Buy em when you can, not when you have to." In other words, buy options on the cheap, but sell them when they are in demand.
Dear brethren: I was browsing through the board and found this interesting thread about options trading. I would like to know your ideas about buying naked options. What do you think are the odds for a profitable trade in this respect? With regard to strategies would they be limited to buying low implied volatility options with a strong directional potential? And what about high volatility environments? Could in the money options prove to be a profitable trade under these circumstances? Thanks. OPC