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Selling Premium After a Red Day: Does It Actually Work?

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Breakdown

0:00lesson

Selling premium after red day changes odds

  • Research on selling premium after red day
  • Trends changed post-COVID
  • Comparing pre-COVID and post-COVID
  • Significant impact of COVID selloff
1:32lesson

Average P&L shifts post-COVID

  • Testing 16 delta strangles
  • 45 DTE vs 21 DTE
  • 2013 to 2026 data
  • Red day entry conditions
  • Probability of profits
  • Premium collected changes
3:22lesson

Buy the dip community post-COVID

  • Buy the dip trend post-COVID
  • More retail traders involved
  • Lessons from 2020
  • Market shifted to more stable regime
4:59lesson

Win rates consistent pre/post-COVID

  • Win rates between 67% and 75%
  • Consistent pre/post-COVID
  • P&L changes with market dynamics
6:43lesson

Downside risk post-COVID

  • Downside risk with large down moves
  • Tail events more dramatic
  • Trend reversed post-COVID
  • Higher premiums with higher risk
8:22lesson

Selling into volatility trade-offs

  • Higher premiums with higher risk
  • Tail risk increases with volatility
  • Timing matters more than being bearish/bullish
  • Big moves often follow big drops
10:11lesson

Compensation for volatility

  • Compensation for higher volatility
  • Set trades to match risk tolerances
  • Potential P&L volatility expected
  • Trading strategies adapted to conditions

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