1000 puts is a lot more than 450 shares. if you sell 1 put on bsc at 50 strike and bsc goes bk over the weekend you lose 5000 minus the prem you recieved. if you are long 100 shares at 50 and it goes bk over the weekend your loss is 5000. selling the put is actually less risky because you recieved a small premium.
Yea I deleted it cause I really wasn't sure and I had to check my facts before I commented, I'm still not that sure about your logic tho. Perhaps an expert will see both of our posts and give us some insight. I really don't care if either of us is right or wrong, I would like to learn from this anyway. I'm not any kind of expert on options infact i just learned in the past 3-4 months and am dabbling in them now. I commented before writing to the best of my knowledge and what i've learned. The delta i guess might be higher than 45, by your math it would be around 77, but i guess i'm missing something here.
It did. I do not know if you were one of those saying at the time, fundamentals are strong, buy on the pullback, and the world is flush with cash. Anyone who is not long is an idiot... remember just a few short months ago...
<i>"1000 puts is a lot more than 450 shares. if you sell 1 put on bsc at 50 strike and bsc goes bk over the weekend you lose 5000 minus the prem you recieved. if you are long 100 shares at 50 and it goes bk over the weekend your loss is 5000. selling the put is actually less risky because you recieved a small premium."</i> 1 put option = 100 shares of underlying stock 1,000 put options = 100,000 shares of underlying stock Short the $55 strike put = net long 100,000 shares at $55 cost basis minus the premium collected when sold. If that was $5 per share (example only) the cost basis on this position would be $50 x 100,000 shares = $5,000,000.00 Now simply figure out where the stock closed tonight, and there's your unrealized profit or loss.
Do any of you genii know how a market maker would hedge a large put sale such as took place in BSCrash. I mean at 50 cents for a shitload the 30 puts , what kind of delta hedging can you possible do??????? Unless they layed it off in other options with other suckers, that aint much vig to play with. They spiked to $9 freaking dollars. This is 4 days after the puts were bought. Ya think the insiders might have made a few million here?
1 option contract = 100 options. When i said 1,000 puts thats selling a 10 lot. And to the last post, yea they hedge it in stock with the equivalent delta, or they pay up for an ITM call and are synthetically long, so they sell out the stock against it. Unless they hedge it perfecftly, and most people just hedge the deltas, on a big move like today hedgers most likely lost money.
As Austin P stated: 1 put option = 100 shares of underlying stock 1,000 put options = 100,000 shares of underlying stock A 10 lot = 1,000 shares, not contracts. 450 shares = 4.5 contracts, which would have to be rounded to 4 or 5 since half contracts aren't traded.
While I agree with some of what you have to say I think a couple of points may be of some value. 1. There are no rules that say you have to write a lot of naked options. Granted you have a point with your comment "make real money" but some as myself write naked options but do NOT write many in relation to the size of my account. I am not trying to make big/real money. I am trying to add to my overall percentage for the year without putting my account at enough of a risk to have to change anything I do. Plus I often write OTM puts in stocks that I am willing to buy at the strike price so I am comfortable with even having the stock put to me. 2. I am guessing that you don't really mean 1/1,000,000 of a chance in anything as IMHO if a 1 in a million event happening will keep you out of the market than I don't think you could invest in anything other than a passbook savings account.
The fallacy is You aint smart enough to tell a 1 in a 1000 from a 1 in a million event. I guarantee it.