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Options Jive

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Selling Options in Bull and Bear Markets

Options Jive

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

The overall market is in either a bull or bear market depending on whether the market has trended up or down in recent price movement. Since we are primarily options sellers, we thought it would be interesting to see how our strategies have worked in these two types of market.

The three strategies that we are looking at today are:

And we are looking at how these strategies acted in both of these environments since 2006.

The Results

The short VIX call spreads and short SPY straddles performed very well in bull markets, but underperformed in bear markets. When we defined our risk with the SPY iron condor, the strategy was profitable in all markets. Tom advocates for having short deltas because this will help offset losses in short premium trades when a bear market does present itself.

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