Crazy Apple call Options

T

Trader7793

I am in the Apple August 135 calls (APVHG's) and today during a major portion of the day they were up a net more than the underlying stock. Example they were showing up 1.10 with prints going off actively on the bid, meanwhile the stock was up 1.00. The delta on the option is listed as .62 and it is only like 3.90 in the money.

Also yesterday I noticed that stock went to 139.98 and the APVHG option was trading at 10.50, today when the stock got to 139.14 the option was trading at 10.50. I would expect that time value eroding away would have created the opposite effect. I understand volatility value increasing, but it seems unlikely to create that sort of price change.

I use a Reuters realtime quote package and even checked the prices off some other quote packages, as it seemed so strange.

What am I missing?
 
Quote from Trader7793:

I am in the Apple August 135 calls (APVHG's) and today during a major portion of the day they were up a net more than the underlying stock. Example they were showing up 1.10 with prints going off actively on the bid, meanwhile the stock was up 1.00. The delta on the option is listed as .62 and it is only like 3.90 in the money.

Also yesterday I noticed that stock went to 139.98 and the APVHG option was trading at 10.50, today when the stock got to 139.14 the option was trading at 10.50. I would expect that time value eroding away would have created the opposite effect. I understand volatility value increasing, but it seems unlikely to create that sort of price change.

I use a Reuters realtime quote package and even checked the prices off some other quote packages, as it seemed so strange.

What am I missing?
More...
I think the different quotes can be explained by the daily changes in iv and the b/a spread. Time decay is still fairly small since you've got the august options.
db
 
Vols are rising into earnings. Jesus people.

LOL.

I just did not think that rising volumes would account for that much price difference...that it could have that much more influence than the delta.
 
Please tell me you understood he meant volatility and you mistyped volume. Otherwise I would refrain from trading options until you understand what you are dealing with. The Vega is .16 so the implied volatility going up about 6 points over the last two days would account for .16*6=.96 points of the Call increase in value. Of course that is just an estimate since there is Volga also, but I am not sure you're ready for that.
 
Please tell me you understood he meant volatility and you mistyped volume. Otherwise I would refrain from trading options until you understand what you are dealing with. The Vega is .16 so the implied volatility going up about 6 points over the last two days would account for .16*6=.96 points of the Call increase in value. Of course that is just an estimate since there is Volga also, but I am not sure you're ready for that.

Thank you for that answer, this is what I was looking for.

Okay I sometimes make option plays, do not trade for a living and do not pretend to know everything about options trading. I am long a bunch of those calls from 7.60 and they went up more than I thought they should, thats all. I tend to focus more on where I think the underlying is going than knowing everything about the greeks, but I am trying to learn more. As long as the option is increasing in value and I am making money, then good...if I can learn more about the effects of increasing volatility...bonus. This was the purpose of the question. The idea that its best to refrain from trading options until everything about the implied volatilty is known and understood maybe important with the type of strategies that you deal with in your options trading (and I wish you luck) but it is not with mine.
 
Quote from Trader7793:

Vols are rising into earnings. Jesus people.

LOL.

I just did not think that rising volumes would account for that much price difference...that it could have that much more influence than the delta.
More...

For all you options market makers and professional options traders, you now know where you are making all your money from. GQ public likes to gamble even if he doesn't understand to whole game.
 
LOL. Don't let the quants spook you. They know more. Maybe even make more. But we can have our piece of the pie too :)

If you're comparing bid to bid and the option is rising more than its delta, it's an IV expansion. Simple as that.
 
Yes opt789 "volumes" was a mistype, I was thinking volatility...as per my original post... "I understand volatility vaule increasing, but it seems unlikely to create that sort of price change".

Your response of...

The Vega is .16 so the implied volatility going up about 6 points over the last two days would account for .16*6=.96 points of the Call increase in value.

was very helpful and has persuaded me to do more research into the effects of Vega and the effects of changes on volatility.

Also thanks to Spindr0 for...

If you're comparing bid to bid and the option is rising more than its delta, it's an IV expansion. Simple as that

As for Hooked2000 and...
For all you options market makers and professional options traders, you now know where you are making all your money from. GQ public likes to gamble even if he doesn't understand to whole game.

Fair enough.
 
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