Many actively trade options the same way others trade stocks. TV and the Greeks are as important to the options trader as PE and other ratios are to the stock investor. Just use the data that is relevant to your investing style and ignore the rest.
" If I sell an option and delta-hedge it"
You would do this if you thought that the cost for hedging the option would be less than volatility priced into the option suggested that it was. I can positively assure you that this is very difficult to get done with extreme market access and tens of millions in capital. Coming up with good delta hedging strategies is really important in hedge fund fields like convertible arb and it is darned difficult to get it right. If you try delta hedging with your retail brokerage account you will just enrich them (note also that if you sell a put you have a positive delta position in your option which means you have to short stock to delta hedge. Just try calling up your broker all the time to change your short position).
Your whole argument here is something like why should I care about the price because the market is efficient? First off, if you believe that the market is pricing options correctly then your only purpose in selling them would be risk management. The notion that you can do risk management of gamma negative option portfolios without knowing the implied vol is face palm stuff for me. You need to understand the entre vol surface to do decent risk management.
If this whole exercise is just like playing roulette, I say welcome to the game. I need to keep paying those guys to fix my Maserati and I can only do that with people like you in it.
good point
Why should I care about theoretical value? Markets are usually efficient and Theo value is somewhere between the bid and the ask.
Why should I care about volatility? If I sell an option and delta-hedge it, I really don't care about TV once I sell it. Once I sell an option I do not ever plan to buy it back. The only thing volatility means to me is that I may not be getting properly compensated for the current realized risk if volatility rises after I paid for it, but at the time I got a fair price. It seems mostly irrelevant though because I never intend to buy back the option.
