Is there any info on the optimum dynamic hedging strategy? Do you implement it systematically or based on discretion? How do you decide if option implied vol is overpriced?
Read this thread: https://www.elitetrader.com/et/threads/writing-options-for-a-living.53037/ It is free, no need to buy a book. And if I were you, I pay attention to Maverick74's posts.
I can even point to a book that talks about the strategy that you mentioned: Complete Guide to Option Selling Only 16 left at amazon.com!!!
No so sir. In that thread, the risks of selling options were explained and I stopped selling naked options to make "high win rate, easy money", after waded through 100 pages.
Tbh naked option selling is not that scary. It's not prudent from a risk management point of view but it is doable. I've even shorted strangles during earnings time and I was OK. The key is no over-leverage and stop-loss especially if you are not hedging. No matter how much you are losing, you have to have the discipline to cut your losses and then treat it as spilled milk and move on. If you were able to sell consistently fat premiums options, losses once in a while should be sustainable. The problem with James Cordier was he didn't hedge AND he didn't stop-loss plus he was over-leveraged, triple strikes against him, that's why he was out. Same problem with Karen the Supertrader. She didn't stop-loss; she just rolled forward, deferring losses. Rolling is not stop-loss in my books; it's just delaying the inevitable and at the same time you are tying up your margin that you could've used to sell more lucrative options that might give you higher chance of winning.