Writing way out of the money call option before expiry, Free lunch?

True its not a free lunch as this was not a arbitrage opportunity. There were actual risks involved in this and I have potential unlimited loss.

He makes his living and then some with numbers :abacus:

I highly doubt OTM’s are my oil mines, but you never know. I will do a bit of reading and actually take a trade or two :sweat_smile:

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A general bit of advice.

In the process of learning, in the path of accumulating knowledge, we stumble upon innumerable things, some things may intrigue us, so only way to see if they work or not is attempt them, with the awareness and acknowledgement that, we are just checking.


Consider this.

Let’s say 18900ce was at 10 instead of 24, then this is how you can strategise.

Buy 1 lot 18700ce at 86
Sell 2 lots 18800ce at 48
Buy 1 lot 18900 at 10(assumed)

My net cost comes to zero. But if you prepare a pay off chart on expiry you will profit if nifty expires between 18700 to 18900. To nullify this reward there has to be some cost. And that’s why that extra 14 points in premium. (24-10)

A lot of other factors are also considered but I have tried to keep it simple. Now if you ask me why 18700ce should be at 86, there are so many reasons for that. Basically your spot prices, futures, option prices of all strikes of both put and call are inter linked. The moment they deviate, there is an arbitrage opportunity which will be exploited and price will correct.

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guy1 : Its oil
guy2: its salt water
guy3 : its contains bacteria and viruses.
.Guy(n) : XXXX

by this time water evaporates and you will be left with nothing, taste it 1 time and then see. Then you yourself will come to know it is sand or normal water

I think you have answered the question here itself. Expected payoff is zero (or very close to it theoretically and in general) - so yep, it’s not free lunch.

Thank you so much!!

Being a newbie, you should prefer safe strategies. Selling option is risky. Traders Sell options after considering days left, OI, news, etc. etc. Avoid selling blindly.