Ultra short high theta options.

Discussion in 'Options' started by noob_trad3r, May 17, 2010.

  1. I sold the May SPY 115 covered calls on some of the SPY I own for 1.09 a contract.

    I do not care if I get SPY called away since I got them cheap but it will be an interesting experiement.

    It seems people are willing to pay for em even with theta almost 15.
  2. Amazing how fast those calls went down since I sold them this morning. Why would anyone pay 1.09 for SPY 115s with only 5 days left in a bear market.

    Delta Gamma Theta Vega Rho Theoretical Value Implied Volatility
    0.3115 0.0986 -0.1287 0.0455 0.0047 0.71 *27.27%
  3. That was a very nice short, but don't get hung-up on theta for valuation purposes.
  4. 1) Reasons?......they're hedging some other option that they sold "high" elsewhere.
    2) Short-covering rallies can be "vicious".
    3) Out-of-the-money option premium is never "free money".