[OC] I sell options for a living. Here is a glimpse into what a typical month looks like. My October performance.S-WordoftheMorning t1_iy3iigx wrote
Reply to comment by indyK1ng in [OC] I sell options for a living. Here is a glimpse into what a typical month looks like. My October performance. by ShallowNefariousness
Selling options only requires that the losing bets don't underperform the premium you collected by selling the option.
Example: I decide to sell weekly call options on GM with a strike price of $15.00. I sell the option at $1 a share. One contract is typically 100 shares. So, if I sell one contract I collect $100 dollars in premium.
If the price of GM closes at or below $15 then the value of the call option is $0.00, and I get to keep the $100 in premium (minus trading commissions & fees) I collected.
If GM closes above $15, the buyer of the call option will exercise their right and I have to either buy back the call option, or sell 100 shares of GM at $15. If the price of GM stock closes at $16, then it would cost me $100 to buy back the option or sell the 100 shares at $15.
If the price of GM goes above $16, now every penny I collected in premium is wiped out and now I have to dip into my own pocket to cover the trade.
The chart says they made $18,362 in profit, which means (accounting for commissions & fees) of the original $92,100 in options contracts they sold, the seller's equity decreased enough that it cost them everything but $18,362 to cover the trades or meet their obligations to sell the underlying stock to the buyer.
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