Who sold the penny contracts?

Discussion in 'Options' started by noob_trad3r, Nov 18, 2011.

  1. When I closed out my 117 puts today someone actually sold them to me for 1 penny



    for example .01 cent x 20 = 20 dollars

    someone now shorted the contracts for 1 penny and I bought them and closed out.

    so someone is now potentially at risk 234K

    to make 20 bucks?
  2. lionline


    either closing their position - 1cent sometimes is worth not taking anything overnight.


    lotto insurance - something HUGE happens and mkt goes to hell.
    1cent is a good pipe bet.

    and / or

    someone has a spread and wants to limit their risk
  3. 1) Some traders like to short-sell the "teenies" near expiration for "free money". :cool:
    2) 234,000 divide by 11,700....?....you were "short" a 20-lot. Dang dude!! :eek:
    3) While you had your position on, you were also exposed to potentially losing "234K". :D
  4. spindr0


    You're assuming that the seller is opening the position and had risk. He could be closing and existing position, salvaging some OTM cash that will be gone by the end of the day.
  5. I will be publishing my book soon. How to be an Options penny millionaire, selling deep OTM closing transaction on expiration friday.

    It will be only 29.95 and I will also be selling a VHS cassette package that will show you the tricks of the trade in an easy to understand fashion.

    for 49.95

    or the whole package for 39.95
  6. sounds good idea to sell deep OTM options. I just discovered it recently. sold some QQQ 56 NOV.18 call at the opening at 0.19 to 0.09 to test my theory this morning, now it is worthless. but one thing you need understand is: when you short either put or call, you needs margin requirement. I sold 33 lots, hefty margin requirement. looks it is free money. but if before the closing/expiration, some news outbreaks, you are dead meat.

    based on the margin requirement and possible massive loss (and your gain is too little), it is not worth gambling. normally I used it to reduce my option premium.

    when I look at the margin requirement, first I feel odd. then I realized this is a must. I will not short OTM calls /puts anymore. too much risk, little gain. wrong gamble.
  7. donnap


    It is a fairly reasonable assumption that an MM sold them. With their complex positions covering the strikes and expiries, the 20 lot means little to them and probably did serve to close part of a position at an advantageous price.

    The fact is that the puts were worth far less than .01. - worthless by EOD.
  8. hajimow


  9. bc1


    Yeah but I'm an Options penny pennyaire and can only afford a penny for your book. Then when I factor in your book's time value and IV, most of my penny will be at risk higher than my ROR allows. I don't know how to figure the delta and theta on your book.:D