AOL Call Option Question

J

Joel1979

I have 50 AOL Call Options at a $42 strike. AOL closed at 50.52 today. To me this means at a minimum my contracts are worth $8.52. But the option closed at $7.50. I have only been trading options since last August but I have never seen this before and I don't understand it. Who in their right mind would sell a $42 strike option on a stock trading above $50 for $7.50?

If anyone is willing to explain this to me I would greatly appreciate it.

Thank you in Advance,

Joel
 
It is possible that it is mispriced. You should probably look to capture the arbitrage profit of 8.52-7.50= 1.02.

Exercise all or part of your 50 calls, buy stock at 42,then turn around and sell the stock at 50.52.

I took a peek. 7.40 was the last trade ,possible before it closed at 50.52.
If you look at current bid and ask of the 42 call, it is properly priced.
 
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It prob represents last sale or last bid price which is very far from intrinsic. It's meaningless and untradable. You won't be able to buy the option for less than 8.52

Good job on owning the calls.
 
Basically what ever platform you are looking at is not showing the OPRA close. Most Brokers use the bid/ask average overnight but some use the bid or offer if the last sale is outside the NBBO. These are the closing markets on my platform. This is not a big deal. If you offer at or below parity someone will buy it during trading hours.
 

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You guys are awesome. My account is with Fidelity and they listed the value at $7.50 on the top level which matches the current bid. After digging deeper I see the current asking price is listed at $8.60. Strange they would list it that way on the top level positions page. Thank you all for the replies.
 
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