Subject: Re: A strategy I read about
"Yes. That 1% claim was absurd. It makes me suspect that the author had never done the strategy, just pulled figures out of thin air. A lot of investment authors clearly just make stuff up."

Are you saying that you cannot achieve a time value of < 1%, or the (strike + premium)/stock price - 1 < .01?

Arghhh, can't select/cut text from the kindle reader app. Can't search on "1%", either. It ignore the "%" sign and just searches for "1".

Anyway..... she says "effective price less than 1% away from current price".
Effective Price = strike + premium.

For some reason she seems to think that option volume has some importance.

She gives examples of 1 year DITM (~50% ITM) SPY calls with time value 0.5% of the option price. She says to shoot for less than 1%.

But when I look at current SPY options, I get more like 3.5% time value.
SPY MAR 21 '25 $255 CALL ($266.00 mid between bid & ask)
Time Premium 9.065
Intrinsic Value 256.72
9.065/266 = .034 = 3.4%

EP = 266 + 255 = 521.00. SPY is 511.72.
(521-511.72) / 511.72 = 0.0181349175 = 1.8% = almost twice the 1% she says to look for.


Not saying that the idea is all wet, just that her figures are unrealistic.