Gladly, he purchased the 534 put on Wednesday midday, prior to tariff announcement, when the market was still bullish for some insane reason. When a bullish SPY is at 565 and you're buying a put for 534 that expires in two days, its gonna be very cheap (contract price at $0.20 per share).
Then the market took an absolute nosedive to the point this "highly unlikely" move ended up not just in the money, but fucking DEEP in the money. So the put was sold this morning when spy was around 520. If he had sold it at closing, his contract would've been worth approx $3,000.
If he had put in $200 instead of $20 initially, final payout could've been $30,000.
But if he was wrong, couldn’t he end up OWING much more than he put down? Like the 20 bucks going to zero isn’t the worst it could get. Couldn’t he be forced to pay much more if the spy skyrocketed?
Hi congrats! I'm quite new to options, so I'd like to ask: what if the share price falls further after you've sold your put option for profit? Wouldn't the buyer of this option exercise it and cause you to have to sell the actual shares (i.e. for you to spend money to buy the shares if you didn't hold any shares initially)? Thanks!
the original seller of the contract is liable if it gets exercised, it can be bought and sold an infinite amount of times and that doesn’t change.
e.g, person a sells a put for $100, person b buys it, stock drops to $90, person b sells it to person c for profit, person c exercises it at $80, which means person c sells 100 shares of stock to person a at $100.
yeah, when you buy options, your max loss is limited to your initial capital. when you sell options (especially naked), then you might start getting butt fucked when they get exercised and you have to sell your shares at below market price or buy them above market price.
this is why most brokers (if not all) require a margin account for options trading as you may not have enough capital/shares to cover your calls/puts.
nope. selling a naked call just means you don’t own at least 100 shares of the stock. this means if the call you sold gets exercised, you are forced to purchase 100 shares at market price to sell at the strike price to the person who exercised the option.
selling a naked put is when you don’t have a short position, which means you are forced to buy the shares at the strike price from the person who exercised. a short position helps to cover the put as you profit more as the stock falls in price whereas selling a put is the opposite.
just a disclaimer: i’m not an options expert, i just learn this shit to understand the memes on wsb. so i may be wrong on some stuff.
and do all cals/puts get exercised or is that part of the risk of doing calls/puts? or just the naked ones? again thank you so much, i'm going to try to read up/learn more about options before even considering dipping my toes in - i'm interested in trying out $20 like OP did (also knowing it may be a total bust) but will definitely research a lot more information before doing so. :)
79
u/Dependent-Goose8240 1d ago
Gladly, he purchased the 534 put on Wednesday midday, prior to tariff announcement, when the market was still bullish for some insane reason. When a bullish SPY is at 565 and you're buying a put for 534 that expires in two days, its gonna be very cheap (contract price at $0.20 per share).
Then the market took an absolute nosedive to the point this "highly unlikely" move ended up not just in the money, but fucking DEEP in the money. So the put was sold this morning when spy was around 520. If he had sold it at closing, his contract would've been worth approx $3,000.
If he had put in $200 instead of $20 initially, final payout could've been $30,000.