Yield on puts options doesnt compensate risk
Vix is price of call and put 'at the money" annualized.
the current vix yield cut in have gives us an estimate of downside premium put sellers collect and buyers are paying. its near 8%. its probably less because there is a slight upward skew.
In the last 20 years, there have been times when vix has spiked very high and this "put yield" has been roughly 40% for the downside premium yield. High vix premium is correlated more often with fear to the downside than fear to the upside.
Some of you may remember what happened in 2018 when too many put sellers got caught short puts and volatility repriced. they called that one "Volmageddon".
volmageddon article here regarding xiv etn blow up:
https://www.ft.com/content/8a8ea648-5ef1-48f3-8409-33f82a5154c1
Just be aware that puts selling isnt free money, and sometimes the juice isnt worth the squeeze.
Know what you own and be willing to own or get paid to own it at your strikes.
the current vix yield cut in have gives us an estimate of downside premium put sellers collect and buyers are paying. its near 8%. its probably less because there is a slight upward skew.
In the last 20 years, there have been times when vix has spiked very high and this "put yield" has been roughly 40% for the downside premium yield. High vix premium is correlated more often with fear to the downside than fear to the upside.
Some of you may remember what happened in 2018 when too many put sellers got caught short puts and volatility repriced. they called that one "Volmageddon".
volmageddon article here regarding xiv etn blow up:
https://www.ft.com/content/8a8ea648-5ef1-48f3-8409-33f82a5154c1
Just be aware that puts selling isnt free money, and sometimes the juice isnt worth the squeeze.
Know what you own and be willing to own or get paid to own it at your strikes.
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