Seller of Apple puts risks $290 million to make $770,000 in premiums

From "Options trader lays out huge bet on Apple into earnings" which aired Thursday on CNBC:

“The market is currently implying a 5.3% move [in either direction], substantially higher than the 3.2% we’ve seen over the last eight quarters, and one trader is taking advantage of this elevated implied volatility,” Tony Zhang, chief strategist at OptionsPlay, said Wednesday on CNBC’s “Fast Money.”

″[They are] selling nearly 20,000 contracts of the 150, 145 and 140-strike puts that expire this Friday, collecting about $770,000 in premium, betting that the stock will be above $140 by expiration. But, if it’s below $140, [they have] $290 million of stock purchase obligation,” Zhang said.

This particular trade includes a sale of 9,998 contracts of the 145-strike puts, alongside 4,999 contracts of the 150 and 140-strike puts, each.

Cue the video:

My take: That Apple will close Friday above $140 seems a pretty good bet, but it's not one I could afford to make.

BTW, Tony Zhang looks like he's 12.

7 Comments

  1. Fred Stein said:
    The bet is not as risky as it appears.

    If the stock does drop, Tony and can buy back the positions and sell puts at the same strike prices one week out (or more) putting money in his pocket.

    He can go on forever, while Apple buybacks “have his back”. Pun intended.

    1
    January 27, 2022
  2. Cy Manning said:
    A good take PED . . . and I certainly hope we stay above $140, too!

    It’s nearing time to celebrate or commiserate . . . at least short-term. Slightly more nervous than usual given the market has greater uncertainty, unpredictability and volatility vs recent prior earnings.

    0
    January 27, 2022
  3. Cy Manning said:
    9 red days in a row . . . must be nearing a record.

    0
    January 27, 2022
  4. Michael Goldfeder said:
    Calling Gregg! Calling Gregg! Your expertise is needed ASAP! Sign back up!

    2
    January 27, 2022
  5. Kathy Corby said:
    Well, it worked out well for him, and now he has an extra 770,000 bucks in his account. But, suppose you had tried the same strategy on Netflix. Unless you had hundreds of millions of dollars to blow on shares, you would have been in trouble. And no amount of rolling would have gotten you out of it. So a word to the retail investor: Yes, if you want to make a bullish bet on earnings, go ahead and sell puts, but not “naked” puts. If you sell put spreads, you still make money if you are right, but your losses are capped, and you live to trade another day. And by the way, you can sell put spreads anytime. You don’t need to wait for earnings. You just need to be fairly confident that the stock will stay above your “short” strike, and deal with the consequences if you are wrong

    3
    January 27, 2022
  6. Romeo A Esparrago Jr said:
    Friday close 170.33.
    Congratz to Tony Z!

    1
    January 28, 2022

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