Selling an Option When Its Expected Payoff Is Zero

Summary

This brief exchange asks what price to charge for an option whose expected payoff is zero. The reply gives a minimal market-based answer: a seller would accept the smallest positive amount buyers are willing to pay. It treats the question as one of willingness to pay rather than deriving a fair value from a pricing model.

No assumptions are specified about the probability distribution, risk preferences, discounting, hedging, or whether “expected payoff” means a physical or risk-neutral expectation. The answer therefore does not establish that a zero expected payoff implies a particular option price. In practice, valuation also depends on risk, market prices, and the pricing framework; this exchange offers a concise intuition, not a general pricing method.

Key ideas

• The reply frames the sale price as the positive amount buyers are willing to pay.
• A zero expected payoff alone does not determine an option’s market value.
• The exchange specifies no probability measure, discounting convention, or risk assumptions.
• The answer is an intuition rather than a complete option-pricing framework.

Tags

# Expected Option Payoff equal to 0


# Expected Option Payoff equal to 0












How much would you sell an option whose expected payoff equals 0?

## Answer by Bob Jansen (score 3)

https://quant.stackexchange.com/a/55980

For as little as people are willing to pay (as long as it’s a positive amount).

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.