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Started By
Message
Potential GME options play?
Posted on 1/31/21 at 10:04 am
Posted on 1/31/21 at 10:04 am
The IV of GME has made these premiums absolutely insane. I was trying to think of a way to make some money off of this, in a relatively safe manner, and think I have an angle.
Looking at the 1/21/22 options -
$4 puts at $0.94
$2 puts at $0.38
I am looking at $2-4 puts. I think it is highly unlikely that GME falls below $2 and yet look at those premiums. Your biggest risk is bankruptcy - which is close to 0% imo.
Opportunity cost of locking up your money for a year could be a potential downside, but I would be securing the puts with margin that I wouldn't use anyway so that is not a big deal to me.
Am I missing something? Selling these low strike price puts for decent premiums seems like a great way to make some cash at little risk here. Most of my options plays are usually selling covered calls and selling puts on stocks I want to own anyway (I don't want to own GME), so just running this by MT for your thoughts and if there is additional risk I am failing to consider
Looking at the 1/21/22 options -
$4 puts at $0.94
$2 puts at $0.38
I am looking at $2-4 puts. I think it is highly unlikely that GME falls below $2 and yet look at those premiums. Your biggest risk is bankruptcy - which is close to 0% imo.
Opportunity cost of locking up your money for a year could be a potential downside, but I would be securing the puts with margin that I wouldn't use anyway so that is not a big deal to me.
Am I missing something? Selling these low strike price puts for decent premiums seems like a great way to make some cash at little risk here. Most of my options plays are usually selling covered calls and selling puts on stocks I want to own anyway (I don't want to own GME), so just running this by MT for your thoughts and if there is additional risk I am failing to consider
This post was edited on 1/31/21 at 10:35 am
4
Posted on 1/31/21 at 10:17 am to Tigerfan56
The 1/21/22 Puts?
Posted on 1/31/21 at 10:33 am to Tigerfan56
It's a low risk trade, but those puts will likely go up in value before they go down. I'm only trading the stock.
This post was edited on 1/31/21 at 10:34 am
Posted on 1/31/21 at 10:35 am to LSUAlum2001
quote:
The 1/21/22 Puts?
Yeah sorry, fixed OP
Posted on 1/31/21 at 10:43 am to Tigerfan56
I think this is a good idea, but they can't increase in value that much.
This post was edited on 1/31/21 at 10:45 am
Posted on 1/31/21 at 10:54 am to Tigerfan56
Have you done any analysis on what you would expect the price of the puts to be under this scenario:
1) Stock falls dramatically, but no where near single digits, and then levels off for a while
In that event, if the loss in premium due to IV declining > increase in premium due to the puts being closer to ITM, maybe you could cash out well in advance of a year.
1) Stock falls dramatically, but no where near single digits, and then levels off for a while
In that event, if the loss in premium due to IV declining > increase in premium due to the puts being closer to ITM, maybe you could cash out well in advance of a year.
Posted on 1/31/21 at 11:02 am to RedStickBR
Also, I’d be on the lookout to employ this strategy if we get another instance of the “wrong” stock rallying, like what we saw when AMC Networks rallied alongside AMC Entertainment. I’m kicking myself for not selling AMC Networks puts with a strike near the price before the “accidental” rally alongside AMC Entertainment.
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