That’s not optimism. That’s options pricing driven by implied volatility and the current price.

Markets are not wiggly lines.

One of us is thinking about implied volatility wrong. My understanding is that it's not a measure of actual volatility, of either the underlying security or the option itself. Rather, it's a measure of how much the price reflects expected volatility in the underlying security. So in a security with ultra-low expected volatility (IV), options that are far out of the money will have much lower premiums than those where high volatility is expected in the underlying security.

In this way, the poster you're replying to is right. The reason premiums were so low was that IV was so low, but that was because no one expected the S&P 500 to drop from 3350 to 2750 in a few weeks. The IV is pretty high now, but it's still bouncing around much more than the actual volatility of the SPY index itself. I've seen everything from 30-150% over the past few weeks.

It’s still not optimism because it doesn’t imply direction. A low implied volatility just means lower expectation of big moves in either direction.

A stock that has gone up like a rocket ship will have a high implied volatility despite no crashes or expectations of declines.

It’s not optimism that stocks will only go up, but it’s optimism that they won’t suddenly go up or down by too much, which is generally to be avoided unless you’re a trader.

Right, but “not go up too much” isn’t really the normal definition of optimism when it comes to the market. If it was, an even lower implied volatility on a flat market would be irrational exuberance!

A few weeks ago, I spent $730 to buy 73 SPY put option contracts expiring this Friday with a strike of $270, so about 10 cents per share. Unbelievable. I've been selling them over the last week and just finished getting out today with a realized gain of about $30k.

Wish I had put $50k in instead of $1k, but I suppose that's always the lament when an ultra-risky trade goes your way :)

Teach me your ways. Literature ?

If the news says "China puts 760 million people on travel restrictions", you should look at the price of puts.

This.

It was really just insurance. I fully expected the $1k I bought to expire worthless, and the first $230 did, but these ones I was able to exit for a nice profit.

I highly suspect the expected value of options trading is negative, but it's useful as a hedge. Really wish I could spend like 10% of my salary on put options for my employer in case I get laid off, but it's forbidden apparently.

Insurance by definition is negative expected value (otherwise insurance companies wouldn't be in business). Great job hedging!

reddit wallstreetbets obviously

Actually no...I hadn't ever visited before a few days ago :)