GME AMC Options Anomalies

J

JamesJ

So AMC is dropping 40% today... guess what happens to put options...

The far out of the money strikes are trading lower, see 3p march for instance...
Looks like market participants really have a hard time pricing those...
MM seem to be absent most of the time.

Same with GME puts.
I sold feb26 15p yesterday for 2$ before GME started to tumble big...
Now GME down like 70% and option at 1.13/1.32...

What the heck were they pricing in...
 
Looks normal and happens every day with stocks that are expected to drop, like UVXY.
UVXY puts can get more expensive when UVXY goes up.
Generally puts get very expensive at high IV, as they should. This is standard Black-Scholes and put/call parity at play and means that MMs are doing their job. Without MMs you’d control the price, not the price control you.
 
guru said:
Looks normal and happens every day with stocks that are expected to drop, like UVXY.
UVXY puts can get more expensive when UVXY goes up.
Generally puts get very expensive at high IV, as they should. This is standard Black-Scholes and put/call parity at play and means that MMs are doing their job. Without MMs you’d control the price, not the price control you.
More...

sure, but still when AMC is dropping like 50% and falling and put price declines... you really have to ask yourself, what were they pricing in that leads to this massive IV drop even when stock is falling into abyss.
I believe there was much retail demand for puts and those retail traders were just paying way too much IV.
Now they want to bank and are confused why they lost money, even though stock came down like 70%.
 
Agree that this could be demand-driven IV, but nevertheless the IV was like 400%.
I think you’ll be ok, just need to wait, just this kind of anomaly may not be unexpected when everything that happened was an anomaly.
 
AMC Feb26'21 3 PUT was trading at 0.32/0.33 yesterday around 3:40pm with AMC at 16.50$.

Now trading at 0.29/0.30 with AMC at 8$.

This is one for the funny stock market stuff wall...

Vola did drop a lot already yesterday along AMC going lower and dropped even more today.
I really think this is a pricing mistake, as IV for calls is just pricing in another rip upwards.
Puts should not have such an extreme IV explosion, at least not the far out of money with strikes below the mark where the squeeze started.
 
JamesJ said:
AMC Feb26'21 3 PUT was trading at 0.32/0.33 yesterday around 3:40pm with AMC at 16.50$.

Now trading at 0.29/0.30 with AMC at 8$.

This is one for the funny stock market stuff wall...

Vola did drop a lot already yesterday along AMC going lower and dropped even more today.
I really think this is a pricing mistake, as IV for calls is just pricing in another rip upwards.
Puts should not have such an extreme IV explosion, at least not the far out of money with strikes below the mark where the squeeze started.
More...
Great thread I have wondered this myself...I've seen it happen before with large price movements long options lost premium even if the price moves in the direction that should benefit them.

I would love it if someone could explain this using greeks if possible...The basic question is: Why do high IV options lose premium when price moves in your direction AND stays highly volatile (wouldn't expect a huge drop in IV)?
 
zghorner, I don't think greeks or B/S calcs would explain it (although I would welcome someone trying). The answer, I suspect, is that with wildly irrational moving stocks (such as GME) there can be wildly irrational options pricing simply because of the supply/demand pressure.
 
You know it's been tough being naked long GME and etc options even if you knew the move was going to happen.

Yesterday the GME 130 put went from 2X.xx to 1X.xx, 50% loss on the stock down 30%. Tough to hold thru that seeing IV implode.

Today if you had held the same put it would be up 100-200% as of 1PM EST. 4X.xx to 5X.xx from 2X.xx
 
zghorner said:
AND stays highly volatile (wouldn't expect a huge drop in IV)?
More...

It seems IV has dropped by 300%. From 600%-700% to 350% over 3 days. That's a huge IV drop:
upload_2021-2-2_10-0-10.png
 
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