Does selling OTM put and put spread tend to have negative EV? For EV to be positive, the probability of ITM has to be very small.
I sell OTM put and put spread. Today I surprisingly realized that all of my positions have negative EV using delta as a proxy of prob. ITM. For EV to be positive, the real probability of ITM has to be insanely small.
Here is one position on my book as an illustration. Was I stupid trading these? Or is it generally the case for OTM puts?
>TQQQ 66/69 put spread, expiring 2026-05-22: based on TQQQ at $78.95 as of 2026-05-14, position size short 40 put spreads, short leg 69 put, premium $864, gross exposure $12,000, max loss $11,136, EV = 0.90 × 864 - 0.10 × 11,136 = 777.60 - 1,113.60 = -$336.00; positive EV requires real-world loss probability below 864 / 12,000 = 7.20%.