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SPDR Dow Jones Industrial Average ETF Message Board

  • tjfvu tjfvu Nov 6, 2008 3:04 PM Flag

    weird options prices

    was wondering how come nov calls for 71 & 72 are up while 70- & 73+ are going down as usual...could someone please explain this phenomenon?

    best regards,

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    • Some move more agresssive than other depends on open interest volume. More trading avtivity causes price to fluctuate faster and higher than the other premium strike price,but by end of the day it will be adjusted to their normal price(true value).

    • The daily change is based upon the open, if it closed lower than yesterday’s bid/ask because it did not trade at the end, it would be “up” from the previous last which was the previous close. Geez! I’m confusing myself. Watch the bid/ask during the day, more important.

      Look at where each closed yesterday; some calls got a boost just by opening at the new bid/ask.

      Anybody have a clear answer? Am I off base? Who’s on first? Yes. What’s on second?

      • 2 Replies to ftlaud60
      • They're priced properly.

        The reason you're seeing it like that is because of a)today's spread between the bid/ask being wide (because they are deep in the money), and b)the previous closing price's spread.

        Look at the DIA NOV $72 call. B/A is 15.40/16.60. The last transaction was someone BUYING the calls at $16.65. They hit the offer. If the last sale had been someone SELLING, i.e. hitting the BID, then it would have been $15.40 app. So instead of it showing +$1.25 on the day, it would be showing $0. But obviously the same thing happened YESTERDAY, i.e. someone hit the ASK as the last trade. So if you take the WIDE spread, and you multiply it by 2 (for 2 days, yesterday and today), you can get a swing of as much as $2.50 in that "net change" figure. Understand?

        Bottom line: the options are being priced correctly, it just looks funny because of the wide spread.

      • Abbot and Costello - Who's on first

173.82+1.04(+0.60%)Jun 28 4:00 PMEDT