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I’ve been watching something unfold in the options market — and if you’re still buying premium the way you did a few months ago, you’re probably feeling the squeeze too.
Here’s the reality: Market makers are making bank right now. It’s a little tough to buy options when premiums are this elevated — you’ve got to be extremely selective about when you pull the trigger.
The culprit? The VIX. It’s up and down right now, and up big again today above 23.
What used to be a straightforward setup now costs you double or triple what it should. This isn’t the kind of market where you can just buy calls or puts and hope for the best.
The deck is stacked against you when every option you look at is bloated with premium. That’s why I’ve found myself saying you either play longer out or you play intraday, because I’m not willing to play weeklies holding overnight in conditions like this.
The Strategy Shift I’m Making
So what do we do when buying premium feels like throwing money away?
Simple: Figure out which direction something’s going and then structure the trade to work with the environment instead of fighting it.
I’ve been looking at some base-hit directional moves using spreads — not swinging for the fences, just defined-risk plays that let me take a view without paying through the nose for volatility I don’t need.
Sometimes it comes down to thinking you could probably take some base-hit directional moves if the setup is clean and the levels make sense.
For example, I ran the numbers on a March 13 expiration Rocket Lab (RKLB) at-the-money spread to see what kind of credit we could collect by selling it. A one-to-one spread came out to about $47.
Not earth-shattering, but when premiums are this fat, selling a little risk in the right spot can make sense — if you’re confident in the direction.
Now, I’ll be honest: Things have been so chaotic that I’m not rushing to sell premium either. You don’t want to get run over by a headline or a gap that blows through your strikes.
But when premiums are so inflated, you have to at least consider flipping the script and letting someone else overpay you for a change.
The Bottom Line
This isn’t the time to force your old playbook. When implied volatility is expensive and staying expensive, you adjust.
That means being hyper-selective if you’re buying, using spreads to cap your cost, leaning on longer-dated or intraday setups, or even exploring the sell side when you have a strong directional read and defined risk.
The key is matching your tactics to the environment — not hoping the environment bends to fit your favorite trade.
Premiums won’t stay this inflated forever, but until they come back down, I’m keeping my size small, my risk defined and my expectations realistic.
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To better trading,
Alex Reid
WealthPin
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