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but when you sell options you are betting that the stock won't move towards the direction described in the option because if it does you are going to be margin
by f430 6y ago
but when you sell options you are betting that the stock won't move towards the direction described in the option because if it does you are going to be margin called by your broker.
I don't know exactly how it happened but someone on wallstreetbets a while ago said he woke up to find he was -250% and asking what to do. I assume he wrote bunch of options which ran against him.
It's disturbing because I talked to this kid literally a week before I told him I blew up my account buying far OTM puts (I was right about the price but SEC froze the stocks far past the expiry).
- pliny 6y agoIf you have enough cash + leverage to buy the underlying on the puts you won't get margin called, you'll get assigned.
- glenngillen 6y agoThis is an over simplification and generalization of what the underlying motivations might be. I will semi-regularly sell puts with a reasonable expectation of being assigned. It is in effect the same as putting a limit order in, with the upside of getting paid for doing it.