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Premium Addiction
Weekly Edition: May 6th, 2026
A Quick Note…
I’m on vacation this week, so this one will be kept brief. Onward.
Thought Throttle
There’s nothing sexier in options than scrolling through the chain and seeing those fat, juicy credits just sitting there begging to be sold.
“Just look at that premium.”
“Theta is going to print while I sit back and relax.”
“This is so easy.” (yikes).
But truly, chasing only premium is one of the fastest ways to get humbled.
Premium isn’t a gift from the market. It’s compensation for risk. The fattest premiums almost always come attached to the highest uncertainty.
Big volatility, upcoming events, shaky underlyings, or setups where the stock can absolutely smoke us in either direction.
Super simple example when selling puts: Two different stocks, same 45-DTE at-the-money short put.
Stock A: calm blue-chip, modest IV → we collect $1.20 credit.
Stock B: high-flying name with earnings looming → we collect $2.80 credit.
On paper, Stock B looks more profitable. But that extra $1.60 is the market screaming, “Something big could happen here!”
One gap against us and that “easy money” turns into a painful loser that wipes out multiple small wins, especially if we think the underlying stock is a loser or a dud.
This is how premium addiction works. We reach for fatter credits, take on more risk, stretch strikes or size… until one trade reminds us how brutal Wall Street can be.
Usually not a good idea to bet the kingdom on a pot of gold.
2 smarter ways forward:
Sell premium on names and setups we actually understand and want to hold (or would be ok parting with in the case of Covered Calls).
Be patient—Don’t listen to FOMO. Opportunities will come to those who wait.
Big premiums will always be there to tempt. Say no to the ones that don’t make sense.
Protect the capital first. Let theta do the rest.
Quote(s) I Like
“The game taught me the game. And it didn’t spare me the rod while teaching.”
The elements of good trading are: 1) cutting losses, 2) cutting losses, and 3) cutting losses.
Throttle Q&A
Usually, no. Definitely not when you are just starting.
Earnings premium looks good, but it’s compensation for binary risk. One surprise and the trade can go deeply negative before theta has time to help.
Alot of seasoned sellers use defined risk setups, or even skip earnings altogether.
Do You Need to constantly Hunt for New Premium Opportunities?
One of the biggest mistakes is over-trading just to stay “active.” High-quality setups don’t appear every day.
Patience and capital preservation beat forcing trades in mediocre conditions.
Not at all.
Lower IV means smaller credits, but it often comes with higher probability and smoother theta decay. Many consistent sellers actually prefer calm markets because the risk of sudden losses drops dramatically.
Not a waste of time—but is different for each person.
Back to full form next week. See you there.
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Disclaimer
The information provided in this newsletter is sourced from reliable channels; however, we cannot guarantee its accuracy. The opinions expressed in this newsletter are solely those of the editorial team, contributors, or third-party sources and may change without prior notice. These views do not necessarily reflect those of the firm as a whole. The content may become outdated, and there is no obligation to update it.
Options come with inherent risks. We strongly advise you to consult with a financial advisor before making any investment decisions, including determining whether any proposed investment aligns with your personal financial needs.
