I have a flaw in my logic that I am hoping someone could help catch since I am certain it's flawed.
Suppose AAPL is trading at $200 (it's $179 but i want to round it off for simplicity) right now.
I decide to write a call option with a ridiculous strike price of $400 next week. A strike price of $400 means that AAPL would have to double, which is probabilistic-ally speaking close to impossible.
I also decide to write a put option with a ridiculous strike price of $10 next week. A strike price of $10 means that AAPL pretty much crashes as a company, which is also close to impossible.
In a week, it is pretty obvious that AAPL doesn't go to $10 or $400, but stays at around $200. I would get around a premium of $200 for the written call and a premium of $190, which to me doesn't make sense because everybody would be doing something like that and it would imply arbitrage. Also, who exactly would pay me this premium?
I observe how for AAPL there's no strike prices in these unreasonable ranges: https://finance.yahoo.com/quote/aapl/options/
the maximum lowest strike price is 130.00 while the maximum highest is 210.00.
I am thinking that on one hand, it is obvious that nobody wants to be on the other side of a trade like that so such a trade wouldn't exist in the first place. Is my thinking correct?