Selling ATM options with hedge better than selling naked OTM?

Discussion in 'Options' started by short&naked, Nov 2, 2018.

  1. panzerman

    panzerman

    People sell OTM options because of the higher probabilities of a winning trade. However, people selling options should look at maximizing payoff instead of just probability. Payoff calculations will sometimes lead to selling ITM or ATM options.

    payoff = probability*(reward/risk)
     
    #21     Nov 21, 2018
  2. ironchef

    ironchef

    No offense, but didn't you just said in another thread you shorted GE puts in your son's account, trying to pick up pennies in front of the steamroller?o_O
     
    #22     Nov 21, 2018