The expected return *as compared to passive strategies with low fees* is negative, I think Dodge meant.
That's true for basically any stock strategy. If you are super good, super lucky, or super connected to inside info, you can beat the market, but if you're posting here to get investing advice, odds are very high you will do worse than you would in an index fund.
-W
Yes, that's usually what I mean, but when talking about options the literal translation is true. Let's look at a simplistic example, and say the market thinks there's a 90% chance of SPX closing above 2000 this month. I will assume we're talking about a credit spread, as selling naked can be suicide. If you sell the appropriate option spread, you have a 90% chance of having a profitable trade. If you take the opposite side (the buying side), you have a 10% chance of having a profitable trade.
If you decide to sell the credit spread for $100 (90% chance of success), you will gain $100 if the trade is a winner, and lose $900 if the trade is a loser (10% chance of happening).
If you take the opposite side, a debit spread (10% chance of success), you will gain $900 if the trade is a winner, and lose $100 if the trade is a loser (90% chance of happening).
Just looking at that, the expected return is 0. When considering transaction costs, it becomes negative. When considering behavioral factors, it goes down even further, but let's ignore that for now. The point is that the market expects a return for such a strategy to be break-even. In order for you to believe it's
not break-even, you would also have to believe that you are smarter than the market....which brings us to the whole "efficient market vs the world" topic you mentioned earlier.