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A single $2000 strike call option expiring tomorrow was trading at $250 just before close. If Amazon closes at $2100 tomorrow that option will be worth $10,000.

by tempsy 7y ago

A single $2000 strike call option expiring tomorrow was trading at $250 just before close. If Amazon closes at $2100 tomorrow that option will be worth $10,000. Amazing.

Traster 7y ago
There are always massively out of the money options expiring soon that are worthless and would skyrocket if the company suddenly became much more valuable. They're not valued highly because that very rarely happens, no matter what the guys at /r/wallstreetbets tell you.
- tempsy 7y ago
  This is actually noteworthy because the $2k strike was by far the most heavily traded call option today...not even close, so this wasn't an extremely random dumb lotto bet made by 2 people on /r/wsb
  - gretch 7y ago
    It was heavily traded but there was an equal amount written/sold as bought. Were the writers/sellers lacking of foresight? Were buyers prescient? Was everyone gambling?
    - tempsy 7y ago
      I’m not sure what your point is. Sellers obviously think the credit they earn is worth the risk. Buyers think the price they pay is worth it too. It’s just a two-sided marketplace like many other things. Options writers can and should hedge losses by not writing naked calls (highly risky in situations exactly like this) and instead buy a higher strike option which caps losses e.g. a vertical spread.
      - gretch 7y ago
        You said the option/strike in question was not a dumb lotto bet and you submitted the volume of trading as your supporting evidence. But the state lottery is literally a dumb lotto bet with super high volume. So I don’t see how this wasn’t some set of lucky gamblers. If ER went another way, there’d be some other group making lots of money. Everyone speculating about the future (which is fine depending on the financial circumstances of involved individuals)
    - kccqzy 7y ago
      Options can be used both for hedging and speculation. You seem to only appreciate the latter. Suppose I own AMZN already at a lower cost basis and believe the $2000 strike is approximately the maximum, say for example I believe the stock will drop after a short rally. Then I'd write a call; if the stock doesn't reach $2000, I earn the premium, even when the earnings are bad and the stock tanks; if the stock does reach $2000, I earn the premium and realize the gains on the stock, with only a bit of a FOMO. That's one of the most basic option strategies known as a covered call.
- notyourday 7y ago
  Err... Amateurs trade OOM options because they think it is going to pop. That volume is very small. Most of OOM volume comes from trading complex spreads.
- v64 7y ago
  For what it's worth (not much), it looks like a Wall Street Bettor made this bet. [1] [1] https://www.reddit.com/r/wallstreetbets/comments/ewcebh/amzn_500k_profit_tomorrow/ https://www.reddit.com/r/wallstreetbets/comments/ewcebh/amzn...

by tempsy 7y ago

A single $2000 strike call option expiring tomorrow was trading at $250 just before close. If Amazon closes at $2100 tomorrow that option will be worth $10,000. Amazing.

Traster 7y ago

There are always massively out of the money options expiring soon that are worthless and would skyrocket if the company suddenly became much more valuable. They're not valued highly because that very rarely happens, no matter what the guys at /r/wallstreetbets tell you.

tempsy 7y ago
This is actually noteworthy because the $2k strike was by far the most heavily traded call option today...not even close, so this wasn't an extremely random dumb lotto bet made by 2 people on /r/wsb
- gretch 7y ago
  It was heavily traded but there was an equal amount written/sold as bought. Were the writers/sellers lacking of foresight? Were buyers prescient? Was everyone gambling?
  - tempsy 7y ago
    I’m not sure what your point is. Sellers obviously think the credit they earn is worth the risk. Buyers think the price they pay is worth it too. It’s just a two-sided marketplace like many other things. Options writers can and should hedge losses by not writing naked calls (highly risky in situations exactly like this) and instead buy a higher strike option which caps losses e.g. a vertical spread.
    - gretch 7y ago
      You said the option/strike in question was not a dumb lotto bet and you submitted the volume of trading as your supporting evidence. But the state lottery is literally a dumb lotto bet with super high volume. So I don’t see how this wasn’t some set of lucky gamblers. If ER went another way, there’d be some other group making lots of money. Everyone speculating about the future (which is fine depending on the financial circumstances of involved individuals)
  - kccqzy 7y ago
    Options can be used both for hedging and speculation. You seem to only appreciate the latter. Suppose I own AMZN already at a lower cost basis and believe the $2000 strike is approximately the maximum, say for example I believe the stock will drop after a short rally. Then I'd write a call; if the stock doesn't reach $2000, I earn the premium, even when the earnings are bad and the stock tanks; if the stock does reach $2000, I earn the premium and realize the gains on the stock, with only a bit of a FOMO. That's one of the most basic option strategies known as a covered call.
notyourday 7y ago
Err... Amateurs trade OOM options because they think it is going to pop. That volume is very small. Most of OOM volume comes from trading complex spreads.
v64 7y ago
For what it's worth (not much), it looks like a Wall Street Bettor made this bet. [1] [1] https://www.reddit.com/r/wallstreetbets/comments/ewcebh/amzn_500k_profit_tomorrow/ https://www.reddit.com/r/wallstreetbets/comments/ewcebh/amzn...