If underlying stock prices are random walk in short term, then it doesn't matter where the price go.

What we can definitely certain, is the high Theta in ATM options.

Can we repeatedly sell weekly put, and roll over during expiry, regardless the price? Is this a good idea?


  • 3
    $\begingroup$ You might want to clarify the question. Are you asking if selling weekly puts is a good idea? $\endgroup$
    – user42108
    Jun 7 at 18:46
  • $\begingroup$ After looking at Theta you seem to argue that selling short term options is always more profitable than selling any other maturity. But that is not compatible with rational pricing of options of different maturities. Who would write the other options if the weeklies are always more profitable? $\endgroup$
    – noob2
    Jun 8 at 17:43
  • 1
    $\begingroup$ @noob2, weekly maturity options loss value faster than any other maturity, but at higher risk, which not everyone likes, if they are just focus on that particular contract. Since I am betting that the stock will go up in long term, but it is still random walk in short term, like weeklies, which almost directionless. If I sell put with it, more than half of the time I am getting profit. Havent really back tested it, so would like to hear how sensible is this idea. $\endgroup$
    – VHanded
    Jun 9 at 2:35
  • $\begingroup$ On this basis (that there is a risk return tradeoff, it it is not "free money") your idea makes sense and is worth investigating IMO. It is possible that market makers are reluctant to sell such options because they are difficult to hedge and this could make a difference in the pricing and return. $\endgroup$
    – noob2
    Jun 9 at 11:54

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.