The Sharpe ratio divides average excess return by the standard deviation of returns — and standard deviation squares every deviation before averaging, so a +5% month and a −5% month contribute identical 'risk.' The ratio measures how wide your months spread, never which side the rare month lands on. For a premium seller, that side is the whole story.
The lesson's interactive explorer builds two accounts with identical Sharpe ratios by construction: a steady symmetric one and a premium seller with many small wins and a rare big loss. Drag the rare-month slider from −10% to −45% and the Sharpes stay locked together while the seller's max drawdown and worst month sail away. Same grade on the report card, utterly different lives — which is exactly how short-vol funds have marketed beautiful Sharpes right up to the month they ceased to exist.
The fix is companions, not replacement: max drawdown (the one stat a fat left tail can't hide from), the Sortino ratio (Sharpe's sibling that penalizes only downside deviations), skewness itself via a spreadsheet's SKEW() function, and simply plotting the monthly-return histogram. Each one breaks the symmetry that Sharpe's squaring imposes.
Grading a premium-selling track record then becomes a checklist: ask whether the sample survived a real storm, demand the worst month and the drawdown, run SKEW() on the monthly returns, and read Sharpe and skew together. Sharpe rewards smoothness; skew decides what the smoothness costs.
Educational, not investment advice.