Paid Daily · Resources · Ask Plutus
Is a Selloff Actually the Best Time to Sell Premium
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ticker lesson
Breakdown
0:00lesson
Can selling premium after red day improve your odds
- Study on statistical behavior and math behind selling premium after red day
- Market can't be predicted but actions can be controlled
- Gamblers fallacy: market doesn't have to rebound next day
- Test on HPY 16 delta strangle 41 45 DT manage 21 DT
- Measured 3500+ trades over 13 years
- Parameters include pin rate, return on investment, premium corrector
1:53lesson
P&L trends during market selloffs
- Average P&L increases as market drops
- Volatility linked to SPX and VIX inverse relationship
- Selling into selloffs pays due to IV expansion
- Covid-19 impacted P&L significantly
- Post-covid P&L increased due to more sellers
- Win rate remains stable between 70-80%
3:53lesson
Why selling premium during selloffs pays
- Premium corrected over buying power shows profitability
- IV expansion creates more credit
- Old trades show 4.6-5.2% returns
- 3% down market corrects 10% over buying power
- Buying power and premium change with undefined risk strategy
5:48lesson
Reversion and return on portfolio
- Mini reversion works with 68-74% returns
- 21-day period increases average return
- Selloffs lead to deeper market red days
- Bounce back with higher average returns
- Second reason why selling premium pays
8:06lesson
Risks of increased trading during selloffs
- Largest single loss increases with market selloffs
- More trades mean more chance of loss
- Sell-offs affect strangles and increase risk
- No free meals or free trades
- Losses increase with market depth
10:17lesson
Takeaways on selloffs and premium
- Selloffs create better premium setups
- IV spikes increase premiums
- Short-term recovery helps put recovery
- Win rates remain stable across market conditions
- High opportunity comes with greater tail risk
- Timing selloffs requires understanding market dynamics
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