okt 2008 was an positive month. I was already positive vega before the big gap. I was not trading my strategy at that moment but looked it up in my backtest..
Poop already ran thru the math,but I wanted to get a better feel for your "special brand of crazy". To make 20%/20,000,you would have to sell 3333 of the 190 puts,every 6x per year. Thats 555 options at a clip, long 10,450,000 notional...on a 100k account. Levered 104.5 to1... Down 50%,your margin is 100k,but thats the least of your problems.. Down 20%,your vega will go up apx 3.5x to 4K,and those cheap wings could easily see a bump of 30 vol handles. What kind of leverage are you taking on?
Here are my results of 2020, back then i did also the same strategy. Sure i took a 9% DD in march, but the index was down much more. I don't have static positions, i'm constantly shifting positions with the market. When my systems signals that danger is coming I most of the time go positive vega and also lower my delta constantly. Most of my written puts are at the moment more then 30% away from spot and also have long puts above these written puts. Poop goes e.g. short single names covered with index to keep the vega/delta neutral. You could easily see a single stock go down 20% in seconds while the index goes only 2% down. Thats risk in my opinion!
Also when vola is low i'm constantly buying vix call options to lower my vega risk. But thanks for the positive discussion with you! I have learned a lot!
Your math is not correct. If i sell options for 6 dollar a piece i only have to sell 33 per year to collect 20K...
Im a little confused as to the "6 dollar" option terminology,and the fact that you were short "Hundreds"...I took it as you were selling .06 options,and used the SPY as an example with a multiplier of 100 as the margin was "small"..It appears you are selling 6 dollar options on the SPX? Obviously a massive difference. Short hundreds of SPX 3800 options is a pretty big cap hit,even if ratioed 1x3 or less.. Im assuming you are running a pretty large book
Thats correct, at the moment i'm short only 140 SPX puts. Also when IV is lower i'm not selling longer DTE options, short dated with approx 7 DTE are then more my cup of tea to prevent to much vega risk at the cost of more gamma risk. During lower IV i also like to buy longer dated puts to protect the written puts. My book is indeed quit large, with SPY (or ES) the transaction costs will eat up a big part of your profits...