A notice to Noobs regarding Expiration friday.

Quote from ellevers:

You are correct the auto exercise was .25 and I should have had all my facts before I gave the example; had to look it up but the actually date was june 17 2005 and the actually option was the 280 calls when this happened to me. But my point is still valid for anybody that is interested in if their option will be auto exercised. The last or bid or ask at 3:00 cst has nothing to do if the option will be automatically exercised it is where the closing print happens and the closing prints doesn't mean the last print at 3:00 cst. This also doesn't mean that if you are short an option that you will be automatically exercised for the owner of the option might have other reason for exercising or not exercising. Which is what creates pin risk. People that have conversions and reversals on at the strike where the closing price prints has a decision to make on their long calls or long puts. If someone has the reversal on lets say long 50 10 calls and short 50 10 puts and short 5000 shares and the stock closes at 10 there is no certainty that the person long the 50 puts will exercise. So do you exercise all of your calls? As far as the goog calls and puts go they can very well be at a nickle or at least a nickle at a dime near the close depending on how volatile goog is being. Just last june expiration goog was hovering around the 420 strike with minutes left in the day. You could have easily bought the calls or puts at a nickle at the very least a dime. In the last minute of the day according to time and sales the 420 puts were no bid at a dime. Goog only had a six point range that expiration.
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When you're short an option its not the person who bought it from you who directly effects whether or not you get assigned. When an option is exercised the entire pool of accounts who is short that option has the potential to be assigned, its a random selection.

On a stock with a 6 dollar range on expiration day I dont believe that the ATM strike trades for a dime near the close. If you had pin risk you'd be a fool to not close it down for a nickel or a dime and if you were long that strike you'd be a fool to close it for a dime or a nickel.

Dont take this the wrong way I am not calling you a liar I just have a lot of years in the business and on a stock like GOOG or another with that kind of range a dime is too cheap.
 
Quote from xflat2186:

Couple years ago the auto exercise limit was more then 20 cents and at the money GOOG options would not be trading at 5 cents even at the end of the day. Nice story though
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I mean.. this is none of my business or anything ... but look up GOPGF. .. I'll save you the trouble..

430 call - Google closed at 430.25 and bid ask is .05/.10

Just sayin.
 
Quote from SForce:

I mean.. this is none of my business or anything ... but look up GOPGF. .. I'll save you the trouble..

430 call - Google closed at 430.25 and bid ask is .05/.10

Just sayin.
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Think about this:

Who cares what the closing price is. If I'm a market maker and you want be to buy your long call option, I must have a reasonable prospect of selling the stock to earn a profit. I'm not paying 10 cents for that call option unless the stock is 430.10 bid, or higher.

The closing price is meaningless once it's after hours and I can no longer sell stock against my calls.

Why would I, or any sane person, want to buy the calls, exercise them, and then hope to be able to get a small profit next Monday?

No one would do that. The only people who buy those options (in the scenario you describe) are those who are short them and prefer NOT to be assigned. Thus, they cover.

Mark
 
we're missing something since I would buy every single call offered at a dime and short the stock at 30 cents and take the 20 cent profit, and I am not the only one who would do that.
 
Quote from xflat2186:

we're missing something since I would buy every single call offered at a dime and short the stock at 30 cents and take the 20 cent profit, and I am not the only one who would do that.
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No, you pay interest for borrowing stock. Call prices discount that.

Last sale looks like .15 on TWS
 
Donna, I used the quotes the OP listed for the option and the stock to make a point that a dime is not the correct price.

If I bought every one of those calls I could for a dime and sold the stock at .30 the cost to borrow that stock and deilver it via exercise is less than a penny there are 19 other cents of pure P and every other professional and their brother would be doing it.
 
Quote from xflat2186:

Donna, I used the quotes the OP listed for the option and the stock to make a point that a dime is not the correct price.

If I bought every one of those calls I could for a dime and sold the stock at .30 the cost to borrow that stock and deilver it via exercise is less than a penny there are 19 other cents of pure P and every other professional and their brother would be doing it.
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OK, thanks xflat. I was thinking that the cost to borrow was higher.
 
Quote from dagnyt:

Think about this:

Who cares what the closing price is. If I'm a market maker and you want be to buy your long call option, I must have a reasonable prospect of selling the stock to earn a profit. I'm not paying 10 cents for that call option unless the stock is 430.10 bid, or higher.

The closing price is meaningless once it's after hours and I can no longer sell stock against my calls.

Why would I, or any sane person, want to buy the calls, exercise them, and then hope to be able to get a small profit next Monday?

No one would do that. The only people who buy those options (in the scenario you describe) are those who are short them and prefer NOT to be assigned. Thus, they cover.

Mark
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I didn't really pay much attention to whatever you were saying, I was just pointing out to whoever claimed the ATMs would not be priced at .05/.10 at any time that in fact they were. Past that I could care less..
 
Quote from SForce:

I didn't really pay much attention to whatever you were saying, I was just pointing out to whoever claimed the ATMs would not be priced at .05/.10 at any time that in fact they were. Past that I could care less..
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Ah... are you using yahoo quotes? You should have been using real time quotes.

That quote isn't accurate.
 
Just a question: Do you people get liqueured-up and enter a trade with an unfamiliar instrument after reading a book or a blog?

I'm serious.
 
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