17 ms·

You got balls, yes the IVOL is insane and that's a nice premium, but if for some reason you have a repeat of today, you're out $20K plus. This thing will crate

You got balls, yes the IVOL is insane and that's a nice premium, but if for some reason you have a repeat of today, you're out $20K plus. This thing will crater, yeah, but shorting it is insane and option volatility is ridiculous right now.

undefined1 6y ago
> but if for some reason you have a repeat of today, you're out $20K plus Can you expand on this? Why would they be on the line for $20k+ (or anything) after selling the option?
- rgossiaux 6y ago
  The option seller needs to buy the stock to deliver the shares when the option expires, so if the price continues rising their losses are unbounded (by contrast, their gains are bounded by how much they originally sold the option for).
  - ra7 6y ago
    > The option seller needs to buy the stock to deliver the shares when the option expires Not just when the option expires. You can be assigned anytime after you sell an option.
  - undefined1 6y ago
    Oh, but that depends on how you sell it? Correct me if wrong, but my understanding with Robinhood is that you Sell to Close (by default anyway), which just goes back into the market. No further obligation?
    - ra7 6y ago
      You can buy or sell an option to open a position. If you want to buy it, you Buy to Open and Sell to Close. If you sell an option, you Sell to Open. If you want to buy it back (at a profit/loss and you're not assigned), you Buy to Close which goes back into the market and closes your position. If you are assigned (i.e. the buyer of your option exercises his right to buy 100 shares at the strike price), you have no option other than to buy those shares at market price if you don't have any and deliver it to the option buyer.
silexia 6y ago
I agree with you... There is a (small) risk the stock goes to $1,000 or $5,000. My portfolio won't face any margin calls even with those numbers though... And eventually the price will come back down. I think it was Ben Graham who said the markets can remain irrational longer than you can remain solvent.
- gjm11 6y ago
  Nope. It's usually ascribed to J M Keynes, buy apparently it was actually one A. Gary Shilling: https://quoteinvestigator.com/2011/08/09/remain-solvent/ https://quoteinvestigator.com/2011/08/09/remain-solvent/
- ra7 6y ago
  Eventually it will come down, yes. But you're the option seller, so you can be assigned anytime. I assume this is a naked call you sold (not covered). So you might be forced to buy shares at a really high price and deliver at $320. The big risk with selling options is early assignment.
  - dash2 6y ago
    Maybe OP thinks it literally can't go tits up?
  - base698 6y ago
    Option sellers eat like birds and go to the bathroom like elephants.
    - silexia 6y ago
      I agree, I put in a market order to close the position last night and it filled at market open, so I am safely out.
- Domenic_S 6y ago
  No you'll just get assigned and lose $500k.
- 6y ago

undefined1 6y ago

> but if for some reason you have a repeat of today, you're out $20K plus Can you expand on this? Why would they be on the line for $20k+ (or anything) after selling the option?

rgossiaux 6y ago
The option seller needs to buy the stock to deliver the shares when the option expires, so if the price continues rising their losses are unbounded (by contrast, their gains are bounded by how much they originally sold the option for).
- ra7 6y ago
  > The option seller needs to buy the stock to deliver the shares when the option expires Not just when the option expires. You can be assigned anytime after you sell an option.
- undefined1 6y ago
  Oh, but that depends on how you sell it? Correct me if wrong, but my understanding with Robinhood is that you Sell to Close (by default anyway), which just goes back into the market. No further obligation?
  - ra7 6y ago
    You can buy or sell an option to open a position. If you want to buy it, you Buy to Open and Sell to Close. If you sell an option, you Sell to Open. If you want to buy it back (at a profit/loss and you're not assigned), you Buy to Close which goes back into the market and closes your position. If you are assigned (i.e. the buyer of your option exercises his right to buy 100 shares at the strike price), you have no option other than to buy those shares at market price if you don't have any and deliver it to the option buyer.

silexia 6y ago

I agree with you... There is a (small) risk the stock goes to $1,000 or $5,000. My portfolio won't face any margin calls even with those numbers though... And eventually the price will come back down. I think it was Ben Graham who said the markets can remain irrational longer than you can remain solvent.

gjm11 6y ago
Nope. It's usually ascribed to J M Keynes, buy apparently it was actually one A. Gary Shilling: https://quoteinvestigator.com/2011/08/09/remain-solvent/ https://quoteinvestigator.com/2011/08/09/remain-solvent/
ra7 6y ago
Eventually it will come down, yes. But you're the option seller, so you can be assigned anytime. I assume this is a naked call you sold (not covered). So you might be forced to buy shares at a really high price and deliver at $320. The big risk with selling options is early assignment.
- dash2 6y ago
  Maybe OP thinks it literally can't go tits up?
- base698 6y ago
  Option sellers eat like birds and go to the bathroom like elephants.
  - silexia 6y ago
    I agree, I put in a market order to close the position last night and it filled at market open, so I am safely out.
Domenic_S 6y ago
No you'll just get assigned and lose $500k.
6y ago