Something the other day came to me as I was scanning through different stocks on my TorS platform and I was looking at the " Mark " feature on the Options platform and started noticing that I could in theory, sell deep
ITM credit spreads for more than the actual spread itself was.
Which would mean a FREE trade and no way to lose , or maybe I'm not understanding this correctly ?
Take for Example, a $1 spread on a BullPut spread.
I noticed that on some of these deep ITM strikes, I could actually sell them for $1.15 or $1.25
Which would mean, that I would " Make " money for selling that spread
Now I know that the probability of the stock hitting and thus exceeding the sold
strike is not that great ( ranges from 15 - 30% probability ) , but if the right setup is there and you're virtually getting paid to put on the trade, why not do it, what's the worst that can happen ?
There are plenty of deep ITM credit spreads you can sell and get to where you're pretty much breaking even on the trade ( less commissions of course ), such as selling a $1 spread and receiving .90 cents credit , with only a .10 cent
risk on the trade.
You definitely have to sell deep ITM and your probability of the stock exceeding the sold strike is not that favorable of course
What got me looking at this, was seeing explosive moves in stocks , and trying to risk $1 to make $4 ( assuming a $5 spread ) for example
So from looking through numerous strikes via the " Mark " , I noticed some were actually offering a Credit, higher than the spread itself
This is called finding/having an " Arbitrage " in the Options world I think ?
What would be cool, is to have a program that scans the market/ only those stocks that are optionable , and finds those with these Arbitrages
Anyways, just curios if any other traders look for and trade these types of trades
I have been looking for books that go int these and have not had any success and there's not much on the subject on the internet that I can find either, so maybe what I'm seeing on the Options chain is a mistake in the platform ?
Thanks for any and all discussion and insight
P.S.
I have attached some
screenshots, showing the received credit for selling the spread, being higher then the spread itself
Thanks again - Michael