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Also wanted to flag that VIX and the two day vol aren’t always the same. ERN pointed me to VIX9D which is a bit closer, but especially around big news release days you’ll get a short term vol spike that might not be reflected so much in the VIX.
I find ERN’s second to last post on how to calculate DTE helpful. I add a volatility adjustment to it to help set my strikes.
@nobatmanjokes Good point. 9-day vol is still a bit detached from the 2DTE options. I have my own little risk model using a 5-day and 20-day half-life. I also distinguish between down-side, upside, and up+downside risk. Doenwide risk is the more relevant one! 🙂
I have shifted to 2-3 delta for several months now. It's not as profitable but I also do spreads (100 pt wide) to increase profits at the risk of more exposure.
@charlie02 Do you do spreads in addition to the 2-3 delta puts? If so, what delta do you target for the spreads?
@jsand I do more spreads than puts. I'll throw in the occasional 2-3 delta put. But my bread and butter is 2-3 delta spreads 100 pt wide.
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Well nice little VIX pop this morning.
@navypack Yeah, but I lost some money on my 4610 puts. Crazy thing is that I initially had my full set of contracts with strikes 4560-4575. As an afterthought, I sold another 2 contracts with the 4610 strike right before the market close on Wednesday because the puts I sold earlier that day had such low deltas.
Oh well. With the vol spike, I should make that small loss back soon!
@earlyretirementnowcom I also lost money on a single contract with 4625 strike. Similar to you, I also sold that contract right before market close. It was a 4-delta contract at that time, according to my own calculations.
The last time I lost money was early September 2020. A streak of almost fifteen months without a single contract going ITM.
@twentysomething Wow, that's an aggressive strike! Because of the holiday, I lowered the premium target to only 1/2 of my usual 2-day income target!
@earlyretirementnowcom Oof - that was a wild ride. Can't believe the market tanked so much in the last 15 minutes. I barely made it out with short strike at 4590.
@earlyretirementnowcom I guess I learned that term just in time for today when I hit my first point landing ever. Phew!