Alex, i agree with your comments regarding the price adjustment of INTC after divy. A naive question is if the pps drops by the same amount of the divy given, what's the point of buying divy stocks as after that the pps suffers?
on a different note: what tools are good to evaluate if a specific option (call or put) is too expensive?
I understand it's suplly/demand but anomaly happens and one need to evaluate it the asked price is not too high.
second when selecting an option strike price, do you use a tool or a method to decide which strik price has the best risk/reward?
Stocks should be bought/sold based on whether or not the stock matches your investment goals and whether it is priced at a value you feel comfortable with. There are many types of investors/traders with a wide range of risk tolerances.
The investment goals/tolerances for pension plans, hedge funds, trader are all different.
There is a discontinuity in value that happens at the ex-dividend instant. 22.5 cents will change hands at that instant. The option market maker has to price the options after that instant normally. Just before that ex-dividend instant, the option market maker must protect himself from those who would exercise early and take the dividend and those who would not.
IMO, the option market maker has a very regular and rigid pricing mechanism that uses something like the Black and Scholes Option Pricing Model. Option pricing deviates from these pricing models because of expected news (uncertainty). Any pricing deviation from that model is driven by expectation of news and the option market maker passing the uncertainty through.
There are a number of methods of finding overprice/underpriced options but I don't have any leads for you there. Sorry.
Intel is a low beta stock that generally tracks the market. I feel comfortable selling put options at the money on Intel. I sell them and keep enough premium on them to prevent them being put.
I usually sell them 60 to 90 days out in the $1 per share range and then either cover or roll them. I usually close them out when they drop below 25 cents. I roll them out for credit (usually in 30 cents per month credit) when the premium drops below 10 cents. I have option level 3 qualification so I can sell the naked puts and they reserve cash for the option face value and margin cash to cover the exercise if it were to happen. I usually trade 10 to 20 contracts per transaction so I am a small fish.
I sell to open after Intel has dropped and becomes oversold. When most people buy shares, I sell put options which allows me to take a position and the premium time value is my friend.
I suspect that $22.25 would be the high if it goes that far. INTC last day to get dividend is tomorrow. If there is any arbitraging, you will see some strangely high option volumes in the NOV 9th and NOV 17th options.
IMO, I think INTC will orbit $22 today.
So you think it WON'T pass 22.25 tomorrow? or it won't pass 22.25 today?... how high you think we'll get tomorrow then? Also, doubt much that the ex-div date has much to do with it, unless I"m missing something...
Sentiment: Strong Buy