The Nov. 23 call option premium for SLW earlier in the week was priced far higher (.80) than its price the next day (.40), followed by a price ranging from .20 to .10 after the stock dropped from the mid 37's to the mid 36's. Even though the stock's price by the end of the week had returned to the low 37's and closed at 36.99, the premium for the 37 call never got above .25 and traded close to the .10 level most fo the day. How does a premium drop so precipitously and trade far from a reasonable level for a stock that has dropped by only 1 percent? For similar drops in the price of an underlying stock, I have seen option premiums drop by much smaller amounts than what happened last week to the SLW call options. Was this apparent mispricing be attributable to an imbalance between buy and sell orders on the long side? I wasn't aware of such an imbalance that would have caused the pricing of call option premiums to drop from 80 cents to 40 cents to 10 cents in such a short time without a large drop in the underlying stock price of SLW.
Weekly's or monthly's a week prior to expiration that have retained an excess of value drop exponentially in reverse parabolic mode as they approach expiration--an 80 cent call 8 days from expiration at the money would drop 10 cents a day if the underlying stock never changed a penny. An 80 cent call option pummeled for three days two dollars in the underlying stock would halve TWICE to about 20 cents, rising the next couple days prior to expiration only enough to offest the ten cent decline--two more days, a rise in the stock to just below strike would yield just the result you talked to.
I understand your explanation and it would make sense if other options I have traded acted in a similar way as this. But they haven't. Even when I sold SLW Oct. 26 calls on the last trading day, the premium did not change much, even though the time value had dropped to almost nothing. Other similar options I sold a few days before expiration day without the stock price dropping much and the premium did not move that much. If you look at last week's chart for SLW, you will see that it didn't drop THAT much, and on Friday (the expiration day) the stock price returned almost to where it was trading five days earlier on Monday. I wonder if because Thursday was a holiday and Friday was a half day of trading, along with the fact that this option expired on Friday (not on Saturday as many options do), affected the premium valuation. Of course, I'd love to believe that there was manipulation and I was wronged. As to your reference to options "that have retained an excess of value," that "excess" was lost on Monday and the option premium barely moved with the underlying stock price from late Tuesday to the final day of trading for the week.