Sell an out of the money put for $10
Say it expires worthless 90% of the time - you'd make $10.
10% of the time it expire ITM - you'd lose $100.
What's the expected return?
It ain't $10 - that's the payoff of the most likely outcome.
It's -$1 (your "APY" should be negative)
Say it expires worthless 90% of the time - you'd make $10.
10% of the time it expire ITM - you'd lose $100.
What's the expected return?
It ain't $10 - that's the payoff of the most likely outcome.
It's -$1 (your "APY" should be negative)
https://twitter.com/joshgiersch/status/1481371470332715008
Would have been a better example like this, which probably more accurately represents actual expectation of those strategies:
People over-complicating things.
The best-case scenario is not the expectation of a trade.
I don't know why options make people's brains melt.
The best-case scenario is not the expectation of a trade.
I don't know why options make people's brains melt.
Here is the "101 before the 101" on why options have the price they do...
https://twitter.com/therobotjames/status/1444832714922758148?s=20
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