Comparing 2 simple options

Discussion in 'Options' started by getagb, Jan 12, 2013.

  1. getagb



    I am comparing two options trades, both of which would be a sell-to-open in-the-money put on AAPL:

    JAN 19 '13 $1040 - bid $518.80
    JAN 19 '13 $1010 - bid $488.80

    Is there any reason to sell the $1010 option when the $1040 is available, since the difference between the premiums is equal to the difference between the strike price?

    The way I see it, I either collect $51.8k or $48.8k, and either way if the option is exercised I purchase the stock at the same price.

    What's the benefit, if any, of the $1010 choice?
  2. newwurldmn


    There is no practical difference. Why not just buy stock?
  3. getagb


    It's the same as buying 100 shares of the stock, except if the option is not exercised then I can keep the premium and use it to buy the stock a week later for free (roughly).
  4. getagb


    In case the option was not exercised.
  5. Daring


    Would need more capital.
  6. Huh?
  7. getagb


    Because the option might not get exercised.
  8. Both options are several HUNDRED dollars ITM.

    Why wouldn't they be exercised? Do you really think AAPL is going to be over 1000 at expiration?
  9. Automatic assignment for any option call or put by the OCC in the money by .25 of a point or more. If you are specifically seeking this maneuver out because you think there is a chance it could not get exercised, it would be a complete waste of time.
  10. You look at the bid/ask spread and open interest? You really think you would get filled at the mid?

    And you think you are going to "buy the stock for free?"

    You need to start over on your options education
    #10     Jan 13, 2013