Are options too expensive most of the time? Generally speaking the answer is YES. Why? Partially because there is a buying-side bias to options flow - retail and institutions are mostly buying calls and puts in order to express a view or implement downside hedging.
But how do we truly assess "expensive"? By looking at the Volatility Risk Premium (VRP) - in other words the price of options (implied volatility) versus the actual underlying risk of movement over time (realized volatility).
Over the past 30+ years we find that the VRP is positive about 85% of the time, meaning option prices are generally too high as measured by "cost versus movement risk". That puts the ball in the court of options sellers in theory. But the problem with that assessment is that it ignores the path-dependent nature of equities... meaning, you can be right on volatility and wrong on direction - ie you get run over. And due to the negative leverage nature of short-option positions, this asymmetrical risk is crucial to understand and respect.
Yes, the opportunity is there for the taking... but to properly execute an effective covered call program, for example, you need an expert who can systematically remove as much of the run-over risk as possible. It's knowing how to zig, and knowing when not to zag. Underlying movement must be monitored, and risk management must be applied to succeed in the long run.
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