Ultra short high theta options.

[noob_trad3r]

I sold the May SPY 115 covered calls on some of the SPY I own for 1.09 a contract.

I do not care if I get SPY called away since I got them cheap but it will be an interesting experiement.

It seems people are willing to pay for em even with theta almost 15.

 

[noob_trad3r]

Amazing how fast those calls went down since I sold them this morning. Why would anyone pay 1.09 for SPY 115s with only 5 days left in a bear market.


Delta Gamma Theta Vega Rho Theoretical Value Implied Volatility
0.3115 0.0986 -0.1287 0.0455 0.0047 0.71 *27.27%

 

[atticus]

That was a very nice short, but don't get hung-up on theta for valuation purposes.

 

[nazzdack]

Quote from noob_trad3r:
Why would anyone pay 1.09 for SPY 115s with only 5 days left in a bear market.

1) Reasons?......they're hedging some other option that they sold "high" elsewhere.
2) Short-covering rallies can be "vicious".
3) Out-of-the-money option premium is never "free money".