What's the least risky options writing strategy?

Saltynuts said:
Stock on average (assuming put-call parity or whatever its call, which is not likely the case, but just assuming that for simplicity for example purposes) you win 40 cents, pretty much risk free.

Any further questions?
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Yeah. The entire point of put-call parity (or, ya know, whatever it's called :) ) is "no arbitrage" - meaning that no combination of puts and calls will result in a greater return than the underlying. Otherwise, you'd buy (sell) synthetic longs (shorts) and immediately close them out by selling (buying) the stock. Rinse, repeat, billionaire by day's end.

So I'm afraid the "put-call whatever" is going to create a bit of inconvenience for you if you try what you've suggested in real life. But give it a shot and post the blotter... it'll be a learning experience for someone.
 
Ohhhh, I see I was wrong on selling the deep in the money puts and calls - it IS like selling deep out of the money ones - I my 2 seconds thinking about it I figured if the stock broke one direction you as the seller would get the benefit of the large in-the-money premium paid by the guy against whom the stock broke, but that is not right, because the OTHER buyer would exercise his option and effectively get that benefit.

So, I was wrong. This is the first time I've ever been wrong, whether on the internet or in real life. Gratz guys. Have a cold one, on me. You deserve it!!!
 
Saltynuts said:
Wait, WAT? If you sell at 25 call on a 20 stock, you are going to collect a VERY SMALL premium. Same thing if you sell at 15 put on a 20 stock. That is COMPLETELY DIFFERENT than what I described, and offers VERY LITTLE downside protection, which is WHAT THE OP WAS LOOKING FOR....

Some of you people amaze me... and not for good reasons lol....
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WTF are you talking about???

Next time you are right will be your first:)


Saltynuts said:
Ohhhh, I see I was wrong on selling the deep in the money puts and calls - it IS like selling deep out of the money ones - I my 2 seconds thinking about it I figured if the stock broke one direction you as the seller would get the benefit of the large in-the-money premium paid by the guy against whom the stock broke, but that is not right, because the OTHER buyer would exercise his option and effectively get that benefit.

So, I was wrong. This is the first time I've ever been wrong, whether on the internet or in real life. Gratz guys. Have a cold one, on me. You deserve it!!!
More...
 
Saltynuts said:
Are you for REAL? Doing what you are doing the 20 cent premium on both sides is the same, but you don't have the ability to absorb a ****more than 50% swing in either direction*** without loss! This really is a very simple thing to understand... I just gotta say, this is kind of weird man, I literally have spelled it out to you a few times now...
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omfg, this made me chuckle.
 
Saltynuts said:
Stock is trading for $20. You sell a call with a strike of $15 for $5.20, and a put with a strike of $25 for $5.20. So you collect $10.40 in premiums. Stock has to rise or fall *more than* FIFTY PERCENT before you lose a dime. Stock on average (assuming put-call parity or whatever its call, which is not likely the case, but just assuming that for simplicity for example purposes) you win 40 cents, pretty much risk free.

Any further questions?
More...

Yeah, I have some questions.
 
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