selling OTM to get $5?

Discussion in 'Options' started by 0008, Sep 4, 2005.

  1. 0008


    I found that many OTM options of stock are trading at $0.05. So one contract worths $5. Commission of IB is $1. What is the point to sell such options? Getting $4?
  2. so what's wrong with that ??

    btw IB commission would be $0.50 :)
  3. 0008


    So get $4 for unlimited risk? Unless you sell thousands contract, I think you can't make any significant profit.
  4. I just fail to see your point. If naked selling seems too risky, does that imply they serve no purpose at all?
  5. I wouldn't sell teenies, but the point in BUYING such cheap options, at least for those who sell options, is to close out a profitable position. In that way, I would be paying six bucks ((.05*100)+ 1) for that transaction

    Well worth it, imo, when closing a trade.