July 28, 2017

The Perfect Environment for Selling Options Premium

Let the selling continue – the selling of options premium.

Implied volatility remains high as the market remains anxious about the next piece of news. You can thank the Eurozone for the heightened VIX. At 30, the investor’s fear gauge affords sellers of options premium the opportunity to create spreads with incredibly high (by historical standards) premium.

Premium affords investors/traders the ability to increase the risk/reward of their respective trade in various ways and I am a high-probability trader in every sense of the term. So as one could expect, this environment lends well to my Theta Driver strategy . I sell premium, mostly through out-of-the-money vertical bear calls and vertical bull puts, but more importantly the trades all have a high-probability of success. When I say, a high-probability of success the short strike has a very low delta. And a strike with a  low delta means that the market views hitting that strike as highly unlikely. Basically, a delta of say .08 (as seen on the TOS platform) has roughly an 8% chance of hitting that strike or as I like to say a 92 % chance of success. And this is the exactly the type of trade that I like to make in the Theta Driver strategy.

I will discuss how I use a high IV in highly-liquid ETFs  in greater detail over the next several weeks. Stay tuned!

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