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AAPL: Weekly Premium Seller

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Experienced traders love to sell options. There are very strong arguments in favor of some level of structural overpricing in many options. But selling far out of the money options for small amounts of premium (in this case the call spread only netted the seller $0.05 for $9.95 of risk!) can be very dangerous and is often compared to "picking up nickels in front of a steam roller." For this trade I'll track it very closely. AAPL sold off a bit into the afternoon, pumping up the put spread in this trade to about $0.85 in value, a paper loss near the entire premium balance collected. They'll be sweating a few bullets and hoping the decay (about $0.12 per day) will kick and suck some value out of their shorts.

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At the time of publication, Henry Schwartz held no positions in the stocks or issues mentioned.


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