Short options at expiration?
- Thread starter spinn
- Start date
I'm not sure what you mean by "expires Thursday". All options expire at midnight on Saturday after the third Friday. If this is a January, 2010 option, it ceases trading on 1/15 and expires on 1/16.
This is not a particularly bad trade, in my opinon, certainly no worse than shorting the SPY or the ES as so many ERers have been doing. That's not to suggest there aren't better, less risky ways to short this market. My best guess is that this trade will make money if you hold it to expiration. Your gain/loss will be the premium you received, less the price of SPY on 1/16 minus the strike (102), less commissions. If you do hold it to expiration, you will be short the SPY on 1/16 with a sale price of 102.
@spinn: You're using the terminology wrong, and that's what's behind some of the negativity. With SPY at 112.56, your 102 call is currently 10.56 in the money (ITM) regardless of any gain or loss on your position.
You can't hold past thursday unless you roll over to a further expiry. It's a crappy trade because it takes too much margin: the chances you will make those 10$ by thursday is 0,00000000001% or something like that
You probably won't be able to close it at $1000, even if SPY closes at $112 because all the time value won't truly evaporate until after the market closes, so you're going to eat the spread if you chose to close the trade.
Also, while your risk reward is technically correct, it's sort of along the lines of the lottery. Calculate the expectation of this trade and you'll see it's not the home run case you might be thinking (10:1).
My $0.02.
Also, while your risk reward is technically correct, it's sort of along the lines of the lottery. Calculate the expectation of this trade and you'll see it's not the home run case you might be thinking (10:1).
My $0.02.
For your best interest, you really really should read up on a few good options book and get an understanding before you trade this instrument.