I’ve had one of the best runs in my career in the last 3 months (in dollar terms). I made more than what some people on here have described as quit and retire money. It was all on the single stock stuff that is abysmally hammering all the retail guys according to you.
that’s not what your statement said. You qualified it as the retail community was hammered. Do you still stand by that claim?
yes, 100%.. i said "pretty much" - meaning most of the ones i'm aware of, but NOT all - "everything retail investors touch" - meaning the stocks themselves, not the individual investors - has been getting abysmally hammered.. you could've made 100% ROC in the past month shorting SQ.. but guess what? my statement would still be correct lol cuz SQ is down substantially from her recent peak.. for someone attempting to debate semantics you seem a bit oblivious to the semantics you're actually trying to debate lol.. at least read what i said before making condescending responses based on what you imagined i said..
IMO this is the classic idiocy that is created by the retail options education industry. You CANNOT calculate ITM probability by looking at options deltas. Options delta is IMPLIED by the options price aka implied volatility. If the option you are writing is priced too low it's implied ITM probability is also priced too low and you gonna get your balls kicked if actual vol is higher than implied. Don't use probabilities to select your strikes and term. Use iV vs stat vol and theta/gamma ratios
so, how do you view a situation where an ATM spread with equidistant strikes is marking at less than 50% of the spread width? isn't the ATM probability supposed to always be 50%, regardless of delta? even if you don't buy whatever delta the ATM call is giving (it might say 55, for instance), if ATM is 50%, and the spread costs less than that, are you saying there's still no positive expectancy?
No, because you calculate Expected Value positive probability*positive outcome-negative probability*negative outcome. How would you want to calculate your expectancy when the only thing you know is the premium received, but not the loss due to adverse moves in the underlying? Either the option is sold for more than the delta hedge is gonna cost you or you lose
to circle back to something you said above, about selling options where vol is understated, i'm typically basing strike selection on the shape of the expiration's vol curve.. i try to buy the dips, and sell the peaks, so regardless of which direction the underlying moves the short is losing vol while the long is gaining it.. the goal is to have both delta and mean reversion of the vol curve to neutral as mechanisms for profit.. to answer your question, i would assume, all things being equal in an efficient market, that the expectancy would always be 0 barring some kind of imbalance in market dynamics.. current value = expected value, at least that's what the efficient market theory guys say..
That's probably the best way to do it. You're a trader so you want to buy below fair value and sell above, not speculating about future outcomes. Thing is, options - especially single names - are basically a dealer market more than any other asset class. And the dealers inventory is limited. All you have to do is ask yourself how much pain these guys can stand during special situations. Let's say you're a market maker in stock options, underlying trades about 200k shares at 20$ per day and some guy walks in and sweeps 5 OTM strikes in the 3m for 5000 calls total. First you'd think, what an idiot and adjust your offers higher. He comes back, does the same thing for 5000 calls again. No news on the stock, btw. You widen your spread again but this time you're not that comfortable anymore. You're short 10k OTM calls, your delta hedges already move the underlying and the other MMs adjusted their vols to the upside. Then more call buyers, small lots across all terms and strikes. You're hitting your gamma and vega limits. You bid up to get rid of some exposure at a loss to be able to maintain a 2sided market. Now that is what happens, day in and day out. When MMs are unlucky they get hit by one sided flow over and over and they will adjust quotes to absolutely insane levels that are everything else from efficiency. GME puts? And that is where retail has edge, because you can watch from the sidelines and that's how you get into +EV situations. The market is always wrong and it's up to you to capture the inefficiency