This cant be right, right?

[ProStrats]

I'm new to option trading, and I've been pigging out on tasty trade, and option alpha for the past two weeks and I've learned some options basics.

I've found what (appears) to be a whole lot of risk free opportunity's on BBY which has relatively high IV.

TOS risk profile shows risk free profits on these vertical credit spreads, and I know this can't be right.

what is wrong with their model? are they using fair value, when I would really be filled closer to either the bid or the ask, eliminating this 'risk free' opportunity?

Im assuming no option market maker would ever get me a fill like this in real life, or am i wrong. could I leg into it in a way that he/they don't know what I'm doing (getting a risk free spread)?

why does it show risk free.

I understand that in a high IV environment it is ideal to sell premium, and collect credit vs low iv, but is it really risk free like this?

And yes for those who will say "you are incredibly naive, and new to options, don't throw your money away.", I know that, that is why I'm here asking these questions, so I, and others can get a better understanding of trading, and specifically options.

Thanks.

 

[vegamedic]

premarket options quotes aren't going to be accurate, which will give you these goofy prices on spreads. check it now that the market's open, and if it's still there, sell as many as you can because it won't be there long

 

[Kim Klaiman]

Sometimes even during market hours the mid shows prices that are not realistic, especially if the spreads are wide. The real question is: can you get filled at those prices? I'm willing to bet that you can't.

 

[fyretrading]

yeah you wont get that filled the closest you can get to that is this

 

[MrScalper]

I'm new to option trading, and I've been pigging out on tasty trade, and option alpha for the past two weeks and I've learned some options basics.

I've found what (appears) to be a whole lot of risk free opportunity's on BBY which has relatively high IV.

TOS risk profile shows risk free profits on these vertical credit spreads, and I know this can't be right.

what is wrong with their model? are they using fair value, when I would really be filled closer to either the bid or the ask, eliminating this 'risk free' opportunity?

Im assuming no option market maker would ever get me a fill like this in real life, or am i wrong. could I leg into it in a way that he/they don't know what I'm doing (getting a risk free spread)?

why does it show risk free.

I understand that in a high IV environment it is ideal to sell premium, and collect credit vs low iv, but is it really risk free like this?

And yes for those who will say "you are incredibly naive, and new to options, don't throw your money away.", I know that, that is why I'm here asking these questions, so I, and others can get a better understanding of trading, and specifically options.

Thanks.

You can take options trading to many levels..how far you go will be determined by how much you learn..and how good you become at learning from your mistakes.

First step..for newbies..is.. identify a range..wait for the breakout..or near the breakout..and have your strategy picked and setup before you decide to trade the breakout..if you don't know what strategy is best to use..then I suggest you start reading up on some relevant options books..for..all the info you will ever need is but a click away..but you must be prepared to keep searching until you find the good material!

The worst thing..or the biggest mistake you might make..is listening to idiots talk about things that do not matter one little bit in relation to what you are trying to achieve!

 

[JackRab]

Usually it's not going to happen, what OP proposes... since during normal trading there's hardly going to be that opportunity, unless there's a special situation where there are not quotes, or very wide quotes... and you get lucky when you're quick enough to hit and get filled on good prices... or when someone (market makers) isn't paying attention to what's happening.

@fyretrading's video although it's ppssible given time, it's far from riskless... just because someone manages to leg into it doesn't mean it's riskless... you just happen to lock in a position that's not going to lose money, but this will take time and risk.

Basically the same when you scalp futures... you have a directional risk for seconds... but then you lock in the profit and removing the risk by scalping and getting out of the position.

That said... as a market maker who is on top of what's happening on screen and off-screen, you now and then come across tradable spreads that are riskless... just not that easy.
During dividend cycles you sometimes see that happening. Sometimes calls which are longer dated can be bought at a lower price than front month. Some models don't cope well with the early exercise timing of cum-dividend calls...

 

[DeltaRisk]

I'm new to option trading, and I've been pigging out on tasty trade, and option alpha for the past two weeks and I've learned some options basics.

I've found what (appears) to be a whole lot of risk free opportunity's on BBY which has relatively high IV.

TOS risk profile shows risk free profits on these vertical credit spreads, and I know this can't be right.

what is wrong with their model? are they using fair value, when I would really be filled closer to either the bid or the ask, eliminating this 'risk free' opportunity?

Im assuming no option market maker would ever get me a fill like this in real life, or am i wrong. could I leg into it in a way that he/they don't know what I'm doing (getting a risk free spread)?

why does it show risk free.

I understand that in a high IV environment it is ideal to sell premium, and collect credit vs low iv, but is it really risk free like this?

And yes for those who will say "you are incredibly naive, and new to options, don't throw your money away.", I know that, that is why I'm here asking these questions, so I, and others can get a better understanding of trading, and specifically options.

Thanks.

There isn't edge by trying to arb those spreads. Think about it, would all of these Wharton/Harvard grads give up premium anywhere? Especially in US markets.
There is an edge in trading these, but I can almost guarantee you won't find it online.

 

[Kim Klaiman]

Generally speaking, there is no such thing "riskless trade". You can male a trade riskless during its life (by adding another leg etc.) but you cannot start a trade risk free.

For example, you buy a call at 1.00. The stock rises and the call is now worth 1.20. You can sell a higher strike for 1.40. It is now a riskless trade because you your spread is worth 0.20 which equals to the gain on the original call, so even if it goes to zero, you are still breakeven.

But you did NOT start riskless. You actually started directional and if you were wrong on direction, your risk was pretty high.

 

[Sig]

You can take options trading to many levels..how far you go will be determined by how much you learn..and how good you become at learning from your mistakes.

First step..for newbies..is.. identify a range..wait for the breakout..or near the breakout..and have your strategy picked and setup before you decide to trade the breakout..if you don't know what strategy is best to use..then I suggest you start reading up on some relevant options books..for..all the info you will ever need is but a click away..but you must be prepared to keep searching until you find the good material!

The worst thing..or the biggest mistake you might make..is listening to idiots talk about things that do not matter one little bit in relation to what you are trying to achieve!

The OP specifically asked about what appeared to be a risk free opportunity that he suspected was too good to be true. Several posters provided very good, on-point answers to that very specific question. You provided an generic response about what newbie option traders should do. Then end your post with "The worst thing..or the biggest mistake you might make..is listening to idiots talk about things that do not matter one little bit in relation to what you are trying to achieve!" I guess my question is who the idiot is in this situation given your criteria for idiots?

 

[fyretrading]

Mr scalper sounds like a wanna-be guru whos products noone buys