Why do people sell S&P index options

Discussion in 'Options' started by Saltynuts, Mar 16, 2019.

  1. when you could just sell VIX futures that are apparently much more profitable over the long haul? Like all the VIX funds and ETFs, VXXB, VIXY, UVXY, TVIX, they spiral towards zero, in the case of the last one I think to the tune of almost 100% a year over time. Why not just sell the VIX futures over time instead of selling S&P options, which seem to be much less profitable?

  2. ET180


    Margin requirements. How would that strategy have worked out October 2008 through March 2009? VIX is now sub-teens. Makes more sense to sell it at higher levels. If I had to place a VIX trade now, I'd be selling puts on VIX futures, not the ETF derivatives.
  3. tommcginnis


    Why do people sell S&P index options

    I dunno!

    Give it a shot and see.
    (And *do* send us the trade reports, so we can follow along and gain the wisdom to be had. :wtf::confused::rolleyes: )

    Last edited: Mar 16, 2019
    murray t turtle likes this.
  4. Thanks guys. I'm not saying the time is right to do this or that, I'm just curious as to why there is the huge disparity in returns. If you had sold VIX futures over time, you'd have like a 50% annual return on average. But if you sold puts on SP500 I think your annual return over time would be a lot lower - not sure what, but maybe 15%?

    Is the difference due to the fact that selling the VIX futures has higher risk given how far and fast it can spike? I wonder if there would be some way to shift over time - selling SP500 puts except when VIX spikes, then repurchase those puts and sell VIX futures. I dunno.
  5. JSOP


    Why do people sell S&P index options

    To make money!! Are you seeing the premiums on that option? And it's a weekly option that means income every week!
    murray t turtle and Nobert like this.
  6. Your clueless
  7. Handle123


    It can be part of a spread, if one is long term in S&P and expecting chop off weeklies/bottom of range has smallest risk- selling puts makes sense. Depends on stats of back testing of course.
  8. sle


  9. Handle123


    How what?
  10. Selling options premium generates consistent and predictable income. It can be extremely dangerous if you don’t know what you’re doing. I’ve been selling options premiufor years, and have developed hedges to prevent catastrophic losses. I am very comfortable with the concept, but most traders should never attempt this strategy.
    #10     Mar 17, 2019
    murray t turtle and Handle123 like this.