Newbie: Why can't I just short call options and win with the decay?
I'm a complete beginner to options, so shoot me down if I'm just being stupid.
As question above indicates. Surely I can just short extremely out-of-the-money options to the point that they start at like $0.02 and go to $0.000001. I understand that if the underlying stock goes against me, I can begin to lose.
But say I set my strike price 10 or 20% above on a short-term option, surely the chances of me making 100% on my money due to decay is much higher than the chances of me losing?
Thanks
Don’t know much about options, but sounds like picking up pennies in front of a steamroller if I’m reading this correctly
You're underestimating the extreme amount of risk you're taking on: gamma is going to destroy you at some point
#thetagang
peso problem. You’ll make small wins as options mostly expire otm; however, you’ll lose big eventually if an option expires ITM. It might help to think of delta as probability of expiring ITM
Beatae voluptatibus accusantium numquam dicta itaque aliquam laudantium nam. In voluptas labore voluptas ut distinctio autem. Est perferendis sit dicta reiciendis distinctio.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...