Options mispricing during fast moves.

M

MasterGambler

Does anyone in here ever notice that options tend to reach their highest/lowest prices during the fastest part of a move and not necessarily the lowest/highest?

Spy puts spiked in value during the down move late today as price was pushing down through 1370... Then after price was drifting sideways for a bit at 1369.5 they were worth less than when price was cutting downward through 1370.5>1370 like a knife.

I always see this... It's better to sell your options during the fast part of a move than wait till price starts to drift. Prices are MUCH better.
 
You must learn the Greeks and understand fully how options work. That price spike is uncertainy being priced in. Options prices churn and leak during sideways, dull moving markets. Volatility spikes, aka sudden moves outside a predetermined priced in 'normal' range will inflate with big moves to reflect the panic in the underlying. This can be priced in with wider b/ a spreads as well.
 
Its also important to check the volatility skew. Always check before placing any trades to see if you are getting fair prices.
 
Quote from MasterGambler:

Does anyone in here ever notice that options tend to reach their highest/lowest prices during the fastest part of a move and not necessarily the lowest/highest?

Spy puts spiked in value during the down move late today as price was pushing down through 1370... Then after price was drifting sideways for a bit at 1369.5 they were worth less than when price was cutting downward through 1370.5>1370 like a knife.

I always see this... It's better to sell your options during the fast part of a move than wait till price starts to drift. Prices are MUCH better.
More...

Vol goes up as the speed of a stock goes up.
Secondly liquidity dries up fast as well - so while the marks are higher you may not execute and the prices you are seeing you'll never get.
Finally this is probably a small issue compared to other issues such as waiting to do this on a put that's decaying rapidly.
 
Yea, it's best to enter/exit during the last part of a move than hold for the very last point or so.

Don't listen to these idiots in here... Those prices are perfectly tradable as you should know. SPY is highly liquid.

IMO it's just options selling firms and market makers baiting idiots at the end of a move to emotionally buy/sell at incorrect prices.
 
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