Larry McMillan talks about it in his Options book, page 72. It's an old strategy and its name -- "selling teenies" -- goes back to the days when the minimum price increment was one sixteenth of a point, a "teenie".
I've occasionally been able to dispose of some long out of the money options for a penny or two each on expiration Friday, but more often than not there won't be any buyers. Also, yesterday WFC $10 calls were trading for as low as 5 cents, but then they rallied to as high as $1.40. Here's a chart (sorry, this picture is from Marketwatch and may disappear when they process the option expiry): Also beware of companies that report the night before expiration day. See GOOG, April 2008.
idiot!!! You should know that selling option wings is as old as mankind and is regularly practiced by professionals. HOWEVER, betting the farm with such position is just plain stupid because statistically this RARE event has a probability of happening and it will happen one day. So, pray you wont be around for that day ;-) I guess the only people more stupid than you must be the ones who argued back and forth with you in the ensuing 4 or 5 pages of chatter. I am outa here and you on my ignore list, beginner!!!
Can't disagree. I was trying to teach him something, but this guy is not only ignorant, but proud of that fact. BTW, there's nothing wrong with being a beginner. Mark
This is a simple idea that most beginners think of before learning a basic spread. Why do you come across as if you struck oil? The fact that you described a strategy as "guaranteed" and "risk free" points to your ignorance. Did you consider the fact that any time you make a trade there is someone on the opposite side with the exact opposite outlook, hence the word "trade". Why would anyone take a trade that is guaranteed to lose? Your suggestion would logically result in a dilemma. Really think about what you are saying. If this is a sure way to make money with no risk than more people would be doing it. If more people can make money so easily than everyone would notice and likewise be implementing these trades. Why is this not the case? Because if what you say is correct than why would anyone put their money somewhere else at risk and in something non "guaranteed"? But wait a second, how can everyone make money, where is it all going to come from? There would have to be an equal amount of people on the other side of the trade being ok with losing money every single time. As it has been said, the people losing constantly will hit the jackpot sooner or later. And they will take everything you have. By about that time you should understand why there is a price on those options and the benefit of being on the other side of the trade.