Is settlement price a fraud?

O

osho67

I had a short call option position at 940 in RUT expiring on 7th March. The closing price on thursday was about 932. Friday morning this jumped to 942.11 and then after a short whilw it went down. I was assigned the option . I thought I was safe and will expire worthless.

Is somebody manupilating the market to trap short option position holders. ? And how much difference can you safely allow.?

Comments much welcome. This is a bitter lesson.

Thanks
 
Who is your broker?

RUT could go up during off hours (non US trading session) probably. Could it be the reason? Though I am newbie to options so just guessing.

You need to check other charts, at Yahoo for example, and see if they correspond to your broker charts for the same time. If there is the same spike.
 
Quote from osho67:

I had a short call option position at 940 in RUT expiring on 7th March. The closing price on thursday was about 932. Friday morning this jumped to 942.11 and then after a short whilw it went down. I was assigned the option . I thought I was safe and will expire worthless.

Is somebody manupilating the market to trap short option position holders. ? And how much difference can you safely allow.?

Comments much welcome. This is a bitter lesson.

Thanks
More...

There is no fraud. RUT has the highest dispersion of settlement prices of any product and you should know that. It's 2,000 different stocks that don't all open at the same time and their opening print creates a synthetic artificial price that becomes the settlement. If you are concerned about this you should be trading IWM options, not RUT. And yes the MMers are aware of this and price those RUT options accordingly and that is why near expiration there is always going to be a lot of juice left on them going into the close.

The NDX has the least dispersion. SPX can be bad also. The DJX is usually tame.
 
Quote from Maverick74:

There is no fraud. RUT has the highest dispersion of settlement prices of any product and you should know that. It's 2,000 different stocks that don't all open at the same time and their opening print creates a synthetic artificial price that becomes the settlement. If you are concerned about this you should be trading IWM options, not RUT. And yes the MMers are aware of this and price those RUT options accordingly and that is why near expiration there is always going to be a lot of juice left on them going into the close.

The NDX has the least dispersion. SPX can be bad also. The DJX is usually tame.
More...

Thanks for your comment. SPX weeklys expire on Fridays. So I hope settlement prices are decided after the close. I think Thursday closing is not good. If they decide settlement prices on Friday the investor should be given an opportunity to close/move his position. In vestor is left without any control. I still think they are fixing this price.
 
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