who sells those dime puts?

no, lots of things can happen in the market, but the chances this one is the case are very unlikely ...

 

i know of a managed account strategy which does this.
but you're right that this is probably a very small percentage of overal volume

 

Same thing as being short a naked call. Nothing risk free about being short naked calls.

 

It's the same thing as being short a covered call where you are long the underlying.

 

Yes and that is the same as being short a naked put. Also not a risk free trade. LOL.

 

Well you can sell 1000 contracts make 10,000 dollars
then buy the lower strikes for a nickel and make 5000 dollars. You would need portfolio margin to do this.

 

Risk $500,000 to make $5,000? OKey-dokey.

 

The addition of the call to the long trade reduces risk as well as does the addition of the put to the short one, so the option writing is "risk-free" in the sense that it is impossible to lose more money than you would under the previous condition (without the option).

 

That's not the same as risk free. Saying selling a call reduces your risk in the long stock is like saying a helmet reduces risk of injury on a motorcycle going 200 mph.

 

The wearing of the helmet is risk free and so is the selling of the option (not the whole trade but the option trade is risk free).