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Deep OTM Options


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Deep OTM Options

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  #1 (permalink)
 bchip 
Africa
 
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Hi all

Im just learning about options, and I was looking at TSLA yesterday.
(Playing around on a demo account). I noticed that there were 8000 volume @ 2000
for TSLA on the Weekly option 24 July 2020 (2 days to go)
The current price is 1592 which implies these ppl believe TSLA is going to go up 26% in 1 day

Surely this is just crazy? You can sell the option at 10.75, so 1 option in 1 day should make $1075

I'm just wondering what am I missing here?
Is this a strategy where it works 99% of the time but the 1% it hits you bad?

Also is this what Nassim Talib refers to? As in he buys deep OTM puts on the S&P
and then every 1% of the time it does pan out?

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  #2 (permalink)
 Bermudan Option 
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This is what Taleb refers to when he says "picking up pennies in front of a steamroller". The 1% where you are wrong will wipe out any profits (and then some) for the 99 times you are right. Relative to the tens of thousands of dollars you are at risk for the 1%,the $1,000 short call is just not worth it as a strategy
bchip View Post
Hi all

Im just learning about options, and I was looking at TSLA yesterday.
(Playing around on a demo account). I noticed that there were 8000 volume @ 2000
for TSLA on the Weekly option 24 July 2020 (2 days to go)
The current price is 1592 which implies these ppl believe TSLA is going to go up 26% in 1 day

Surely this is just crazy? You can sell the option at 10.75, so 1 option in 1 day should make $1075

I'm just wondering what am I missing here?
Is this a strategy where it works 99% of the time but the 1% it hits you bad?

Also is this what Nassim Talib refers to? As in he buys deep OTM puts on the S&P
and then every 1% of the time it does pan out?

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  #3 (permalink)
 myrrdin 
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bchip View Post
Hi all

Im just learning about options, and I was looking at TSLA yesterday.
(Playing around on a demo account). I noticed that there were 8000 volume @ 2000
for TSLA on the Weekly option 24 July 2020 (2 days to go)
The current price is 1592 which implies these ppl believe TSLA is going to go up 26% in 1 day

Surely this is just crazy? You can sell the option at 10.75, so 1 option in 1 day should make $1075

I'm just wondering what am I missing here?
Is this a strategy where it works 99% of the time but the 1% it hits you bad?

Also is this what Nassim Talib refers to? As in he buys deep OTM puts on the S&P
and then every 1% of the time it does pan out?

You might want to google what happened to James Cordier and his company Optionsellers.com.

There are some contributions regarding this topic in my thread "Diversified Option Selling Portfolio".

Best regards, Myrrdin

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  #4 (permalink)
 bchip 
Africa
 
Experience: Advanced
Platform: TradeStation
Trading: ES,YM,CL,GC
 
Posts: 105 since Sep 2017
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myrrdin View Post
You might want to google what happened to James Cordier and his company Optionsellers.com.

There are some contributions regarding this topic in my thread "Diversified Option Selling Portfolio".

Best regards, Myrrdin

Thank you very much, this does help me understand it better.



Edit:
Lots of good info here:
https://steadyoptions.com/articles/james-cordier-another-options-selling-firm-goes-bust-r429/

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