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>> This will obviously put implied vols out of the ballpark.
>So why not sell deep ITM puts.
2 main reasons:
a/ I don't sell premium short
b/ I don't know if I'm right. I'd give me no more than a 50% chance of being
right re the bottom being set today. Just don't know.
Ancillary reasons:
a/ If this weren't the bottom, ATM puts make more sense than deep ITMs since
- one has a lesser $$ risk exposure than deep ITMs
- If volatility collapsed, ATMs would lose more value than deep ITMs. ATMs
have the greatest vega ($$ move in option price per unit move in volatility)
which one would be shorting.
- If volatility expanded, deep ITMs would hurt more $$ due to higher delta
compared to the ATMs but ATMs would start losing vega as they got deeper so
$$ risk exposure still prefers ATMs.
b/ Account is not big enough to short index premium naked.
c/ Lesser risk higher reward opportunities elsewhere are plentiful.
Gitanshu
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