Yesterday I was trading CEMI below $5, had the $5 calls and rolled to $7.50s when stock jumped $2.50. The $7.50s and $10s were $.20 difference at one point. If the stock was $6.50 why would the spread be so tight with $3.50 to get to intrinsic? Was it demand?
You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
Option price question. Why the $7.50s and $10,00s so close.
- Thread starter TrailerParkTed
- Start date
Or lack of demand. Could be as many people selling as buying, or market making models see a shitty stock and know it's temporary spike. They also don't let people sell their options for too much when they didn't pay much for them. Happens plenty of times on penny stocks that don't have a reason to stay up for long.
Finally, the short interest %rate on hard-to-borrow stocks can get pretty high that makes the calls cheap because keeping them makes you lose on the %interest that could be collected by holding shares instead.
Finally, the short interest %rate on hard-to-borrow stocks can get pretty high that makes the calls cheap because keeping them makes you lose on the %interest that could be collected by holding shares instead.
Or lack of demand. Could be as many people selling as buying, or market making models see a shitty stock and know it's temporary spike. They also don't let people sell their options for too much when they didn't pay much for them. Happens plenty of times on penny stocks that don't have a reason to stay up for long.
Finally, the short interest %rate on hard-to-borrow stocks can get pretty high that makes the calls cheap because keeping them makes you lose on the %interest that could be collected by holding shares instead.
Great answer. Also, temporary volume spikes are extremely common right now because everyone thinks they might be jumping on the next meme stock. When the stock starts coming back down they have to bail, and the options sellers see this coming, so the supply for calls on the sell side are high. Higher volume and higher supply means tighter spreads, especially in OTM options.
Sounds like vol and skew exploded,as well as bid offer.
Yesterday I was trading CEMI below $5, had the $5 calls and rolled to $7.50s when stock jumped $2.50. The $7.50s and $10s were $.20 difference at one point. If the stock was $6.50 why would the spread be so tight with $3.50 to get to intrinsic? Was it demand?