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Real time pro Options Trader example

By: StudioCity'98



Java,

Continuing the thread on $AAPL Put selling against cash.  I mentioned that Pro Option sellers turn their inventory as fast possible with strikes that have very little chance of being hit. An example from today's prices going off right now is as follows 

The overall market is falling outta bed. The Bear Market growls in full force.  Everything is getting taken out and shot in the back of the mellon.  Prolly the last thing one wants to do is sell naked risk in front of this rolling freight train. But if that's your game do it in a way that put the probabilities on your side.

$AAPL trading at $157.90  

Strike: 152.50
Date: Dec 21 - expires tomorrow, 1 day left

Implied Vol: 63.5% [that's effing huge !!! ]
Delta: -13.4

Bid/Ask: $0.48/$0.51

Put in your limit offer to Sell that -13 delta strike for $0.51 and do it 5000 times.  You take in $2500  [less commission and only  one day of margin interest cost]  Probability keeping that $2500 premium is over 99%

$2500 is not bad for 1.5 days of risk.  Pick out 3 or 4 big names and do the same thing with them too.  You could easily take in $8000 - $10,000 of premium that way.
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With weekly options on big thick liquid names like $AAPL you do the same again next Thursday afternoon. 1.5 days of risk is all you take doing it this way.   Roll that inventory as fast as possible with the least risk as you can structure.

This is as opposed to 211 days of risk by selling the July '19 140, which is going off @ $9.10 now.  Big difference from the $4.00 premium that looked to go just last week.  That's a long time to be sweating whether or not you gonna get taken out on a stretcher.

 Give it a shot man. 

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