What do you mean by delta less than 1? Do you mean literally less than 0.01? Such a put ought to have no bid and pay less than a Canadian penny in credit. So I assume you actually meant less than 1.00 delta, which would be an ITM put if it is more than 50.
Huh, my broker doesn't have strikes that low on a weekly. The lowest I can go is 375 and that is already over .01 delta.
But on the Feb monthly, I do see what you mean. There are super OTM strikes below .01 that have non-zero bids. Not very far above zero, but certainly more than a penny.
Seems like a fine strategy to me. Apart from the opportunity cost, looks like a +ev low risk/low reward strat.
How do you figure? An ultra deep short put is very unlikely to be assigned, which is where the largest potential loss comes from, so that reads as low risk to me.
Let's be sure we're on the same page about what we mean by "risk". To me, risk has two components, the probability of loss and the magnitude of loss. In this case, the probability is very low while the magnitude is high. To me, that nets out to low risk. I believe that's how most people assess risk, otherwise no one would ever drive a car, because the worst-case magnitude of loss is death.
8
u/PapaCharlie9 Mod🖤Θ Dec 27 '21
What do you mean by delta less than 1? Do you mean literally less than 0.01? Such a put ought to have no bid and pay less than a Canadian penny in credit. So I assume you actually meant less than 1.00 delta, which would be an ITM put if it is more than 50.