These long-option or short-option biases hold for other types of strategies
as well. Volatility-selling positions, such as the iron condor, can be
constructed to have limited risk. The paradigm for these strategies is they
tend to produce winners more often than not. But when the position loses,
the trader loses more than he would stand to profit if the trade worked out
favorably.
Herein lies the issue of preference. Long-option traders would rather trade
Babe Ruth–style. For years, Babe Ruth was the record holder for the most
home runs. At the same time, he was also the record holder for the most
strikeouts. The born fighters that are option buyers accept the fact that they
will have more strikeouts, possibly many more strikeouts, than winning
trades. But the strategy dictates that the profit on one winner more than
makes up for the string of small losers.
Short-option traders, conversely, like to have everything cool and
copacetic. They like the warm and fuzzy feeling they get from the fact that
month after month they tend to generate winners. The occasional loser that
nullifies a few months of profits is all part of the game.