why can't i sell a call of 2325 it gives me 45.5*50 premium?
es future options
- Thread starter Mdtbyk
- Start date
http://www.optionseducation.org/documents/literature/files/understanding-profit-loss-graphs.pdf
You need to draw this out. ASAP.
You need to take a COMPLETE course on options if you do not understand why that idea is a complete non-starter and a very bad idea.
Remember, when you are SHORT an option and it ends IN THE MONEY...you ARE FORCED to PAY THE DIFFERENCE between STRIKE and EXPIRATION PRICE at EXPIRATION.
So, selling a 2325 CALL when it is at 2360 means, at the moment, you will OWE 35 points LATER, and MORE if ES climbs, EVEN THOUGH you get 45.5 Points NOW.
Because you already will owe 35 points at the end, you aren't getting 45.5 points...You're only really getting the difference in TIME value (10.5 points). The other 35 points are INTRINSIC value that you OWE if you are short and KEEP if you are long an option.
You are short a future, if you sell a call... you're doubling down on that position. Which means if ES goes up further, you losing not in a 1:1 ratio but (depending on how many calls you sell) 1:2.
The most you could recuperate, is selling the 2360 put... which gives you 20 bucks in premium...
But you will still have upside risk... just a little bit less...
The most you could recuperate, is selling the 2360 put... which gives you 20 bucks in premium...
But you will still have upside risk... just a little bit less...
Also you need to stop shorting a bull market.
doesn't every up market have some downsides ?
Irrelevant.
Every lottery has a winner.
The *relevant* question is: is my risk commensurate with my sought reward. That is *it*.
If you can reframe your market question in terms of risk and reward, you'll be getting somewhere.
If you leave it as "doesn't every up market have some downsides" -- that's totally true. (See; lottery.)
But that's not what will impact your net liq.
Deal with the risk; deal with the reward; DON'T deal with lotteries.
Last edited:
BTW, and not to add confusion to your mix but, while you are aware that the clock is ticking on your short future contract, THERE ARE SUBSEQUENT futures available.
Thus, into your mix, you can roll this Mar17, (lengthening the time to a solution OR to further losses) OR you can buy a Jun17 (effectively freezing the losses right where they're at, while providing other opportunities -- including options bought and sold)
The immediate takeaway is: Don't feel trapped by the coming expiration.
Thus, into your mix, you can roll this Mar17, (lengthening the time to a solution OR to further losses) OR you can buy a Jun17 (effectively freezing the losses right where they're at, while providing other opportunities -- including options bought and sold)
The immediate takeaway is: Don't feel trapped by the coming expiration.