I've seen some deep in the money call options whose premiums exceed the cost of buying 100 shares of the underlying.
Under what circumstances is that a bright idea? I can't think of a single one.
Who's buying excessively priced option premiums?
byu/MyNameCannotBeSpoken inoptions
Posted by MyNameCannotBeSpoken
5 Comments
You can’t think of one reason, really?
You should be selling covered calls and earning those premiums then
I haven’t bought a Call in several days because of this. I thought it was just me and I needed to alter my strategy.
The stock could be hard to borrow or there is an incoming dividend / corporate action. Could just be thin liquidity / wide spreads
Gives you exposure to interest rates/borrow/dividend plus obviously any vol exposure. It lets you over-capitalize a position (eg, apply positive theta to offset long vol cost) and get exposure to rising rates in one trade. Depends on the market makers if it is worth it