That's why I hate selling equity/index options. You have to sell close to ATM to get any reasonable premium. That's why I sell futures options.
Beta what futures options do you trade? Please give me some ticker symbols so I can get an idea of what the premiums are. thanks.
There are too many to list. I trade them all at some point. The sectors I guess would be, energy, agriculture, softs, and metals. You can find these listed here http://www.cmegroup.com/ A real-world example would be: In June, I sold 10 July $130 call options for $900 premium on light sweet crude oil (/CL). Oil was at $100 about. So for me to lose anything at expiration, oil would have had to rise more than 30% in just one month. This is highly unlikely to happen so I will probably keep the $900 premium. I just structure the trades so I almost always win in the end. If the trade goes against me, I buy back when the premium doubles on naked positions, and buy back at triple premium on individual legs on a any short strangles. Futures are the only arena in which this is possible because it uses the SPAN margin system to calculate margin requirements. This allows you sell far more OTM options than is possible with equity options and still take home comparable premiums.
Yes even though the skew most probably does not justify it. Evaluating VIX options both in terms of term structure or the skew is notoriously hard.
You have to open a margin account (which if you trade stocks you probably already have) and then a futures account. Really, all they're doing is allowing your margin account to now trade futures and options on futures.
What about using VIX calls to hedge naked puts on s&P500 index against black swan event. Unexpected event is what most often destroys naked puts accounts, but combined with VIX calls (insurance) might present a great opportunity. What do you guys think?