The probabilities are priced in. Options do not constitute a free lunch. Things do mean-revert.
How does this apply to short-term Out-of-the-money spreads on both sides of the price? I can't imagine an index mean-reverting both up *and* down 100-150 points within a 30-day period. Well sure, anything is possible, but that seems like a rare event.
Think about it - if you bet on BOTH sides of the price, it is true that only
one can get 'hit', but you
doubled your chances that one of them
will get hit. It didn't change a thing, risk/reward wise.
Back to the roulette analogy - easier to look at this from the 'house' side:
A gambler comes in and puts bet after bet on #17. The 'house' would not laugh and say, 'hey, this guy just keeps losing, this is a great bet for the house!'. The house knows that
in the long run, that bet is no different than playing red/black, even/odd, etc.
You are similar to the 'house' here - you keep winning small bets time after time, but somewhere along the line that big payout will come. If that was not the case, I can assure you that people smarter than both of us combined, with more resources and connections would be playing these with computers. But as enough people did that, they would drive the prices back into balance (where I think they are now).
Now take that a step further - the gambler start betting on #17 AND # 15. He CAN'T win both! So the house will never lose both either (just like you can't lose with spreads on both sides of the price)! But again, it doesn't change the odds, because he doubled the chance that one or the other will come up. The 'house' just yawns.
UPDATE: I really don't care to continue posting details of individual trades but my portfolio has now gone from $5k to $50k in one year and I've been invested around 80% all year in credit spreads. I've learned good lessons which will serve me well in the coming years regarding position size, putting multiple positions on one strike and month, and legging out vs. rolling. My average monthly gain is 3.4% and projections still look good.
And now VIX is down, making this a bit tougher game to play. It's great that you are ahead of the game now, I'm hesitant to "wish you luck" though - because it is increased confidence that gets people in trouble with these things. The more you put in the worse the eventual 'hit' may be. So instead, I'll say I'm glad for your success (and not surprised, that's how these work), but as they said in Hill Street Blues, "Be careful out there!".
-ERD50