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Hi all! Just curious to hear people's thoughts if they change their strategy on selling puts on SPX when VIX is low (e.g. below 15). With a potential winter resurgence in COVID, I'm very hesitant to continue as it'll just take one negative news day to ruin this strategy esp with VIX being much lower. Just curious to hear what people are doing/plan to do:
1. Stay the course
2. Pause until VIX gets higher
3. Trade an extra day out. For example, I follow Karsten's strategy of trading M->W, W->F, F->M. Instead of doing F->M, consider doing THU- M
4. Something else
Thanks for your input!
1b: Stay the course, but with a slightly lower premium/delta.
2: Pausing seems like a very unattractive option.
3: I do the Tue/Thu trades but only Tue->Wed and Thu->Fri. I don't see the point in adding one more DTE if you're scared about a possible market blowup. 🙂
I agree with ERN. For #1 in addition to premium/delta you also could reduce number of contracts, close out some before setting the new strikes, or be less aggressive about when to sell new contracts.
I also wouldn’t expect 90%+ premium capture moving forward, so it’s fair to also stay the course and accept closer to 40-50%
If you sat out whenever the VIX got below 15, you'd miss out on most of 2013-2019 where this strategy worked out really well.
The VIX can be predictive of future realized volatility so low doesn't necessarily mean its a bad time to sell just like a high VIX doesn't mean its safe to sell vol.
Stay the course but cut back on premium a bit and you'll probably do just fine.
Thanks all! Very helpful and I plan on cutting back on premium
