I find reading option chains a easy way to learn options, either using trading software or websites. However, it is not always easy to get the correct underlying price when reading the option chains after hours. Trading software such as TWS or TOS shows the 4pm closing option chain data, but the moneyness is determined based on the after-hour price of the stock, which is often different from the 4pm price. I wonder why widely used trading software does not freeze the underlying price at option close. For users, a workaround would be reconstruct the moneyness by looking at the 4pm stock closing price, but it is even trickier for options that trade till 4:15pm, such as SPY. It is hard to find the 4:15pm ETF price without going through the after-hour 15-minite bars. For those of you who reads option chains after hours, I am curious how you fix the underlying price. Thanks.
Incorrect Underlying Price for Options
- Thread starter LM3886
- Start date
Reading option chains after close is subjected to unrealistic BID/ASK pricing. caveat emptor
If you have large positions on, you may consider purchasing the data. This will allow you to reference valid information only, if you wish (does not speculate on non-trading times).
If you have large positions on, you may consider purchasing the data. This will allow you to reference valid information only, if you wish (does not speculate on non-trading times).
What do you mean by unrealistic bid/ask pricing? Too wide of bid/ask spreads?
I have seen a few vendors selling end-of-day options data. Do you think this type of data is useful, or should I go get intraday data? If they collect the data by the end of day, then isn't it very similar to after close option chains data, aside from the underlying price issue could be fixed?
I have seen a few vendors selling end-of-day options data. Do you think this type of data is useful, or should I go get intraday data? If they collect the data by the end of day, then isn't it very similar to after close option chains data, aside from the underlying price issue could be fixed?
Regarding "unrealistic bid/ask pricing"... Since the option market is not active, there is no requirement for a BID or ASK (of the option) price to be valid, as it will not impact any trades. Since the BID and ASK don't mean anything at that time, it is unwise to assume they reflect true value. -- And yes, they typically will widen a lot after the close, but not necessarily equidistant.
I suspect, purchasing option data, is not what you really want. (this can get expensive in time/effort as well).
Why are you wanting to obtain precise option pricing when the market is not open? -- Perhaps understanding that may enable a less elaborate solution? -- I do NOT do this, so may not be the best source of information. -- If the reason is to prepare for hedging your position after the market opens, you would need to test your position with underlying as well as IV, so using something like OptionNet Explorer may be a better fit for you.
I suspect, purchasing option data, is not what you really want. (this can get expensive in time/effort as well).
Why are you wanting to obtain precise option pricing when the market is not open? -- Perhaps understanding that may enable a less elaborate solution? -- I do NOT do this, so may not be the best source of information. -- If the reason is to prepare for hedging your position after the market opens, you would need to test your position with underlying as well as IV, so using something like OptionNet Explorer may be a better fit for you.
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Find a service that only uses the cash close.
I think E*TRADE does cash close in some systems and after hours in others
I think E*TRADE does cash close in some systems and after hours in others
Ah, so primarily for educational purposes! If you have access to TOS, it contains many features that may be very appropriate! It has thinkBack for observing EOD for historic options, and it also has OnDemand to play historic pricing at 1X, 2X, and 3X normal time, which can address some intraday interests (all free). ONE (OptionNet Explorer "https://www.optionnetexplorer.com/") is a fine tool, but years ago when I used it, it costs about $1K per year, but allows manual access to much data and is very useful for monitoring positions as well as manual backtesting.
No! Not in any friendly way! However, you "may?" find that it can be useful "as is" for many trading ideas, with it's "P/L Graph" negating the need to process the data externally. -- Set and forget trades or target exits.