OTM call cost more then ITM!

J

JavaBen

on ARCC, Sep 07, the ITM call (strike $15) ask is $2.40, while the OTM (strike 17.5) ask is $4.60! The bid is $0.15 - quite a spread. It didn't look like this when I bought it; it was something like $0.10/$0.20 (bid/ask) at that time (more or less).

What's going on here? Has the market maker just decided he doesn't want to buy anymore of these or what?

It sure screws up my ThinkOrSwim profit calculation on the Monitor screen!

I have several others with this same issue - higher ask for OTM then ITM!

What's going on? Market volatility spooking everybody?

JavaBen
 
Quote from JavaBen:

on ARCC, Sep 07, the ITM call (strike $15) ask is $2.40, while the OTM (strike 17.5) ask is $4.60! The bid is $0.15 - quite a spread. It didn't look like this when I bought it; it was something like $0.10/$0.20 (bid/ask) at that time (more or less).

What's going on here? Has the market maker just decided he doesn't want to buy anymore of these or what?

It sure screws up my ThinkOrSwim profit calculation on the Monitor screen!

I have several others with this same issue - higher ask for OTM then ITM!

What's going on? Market volatility spooking everybody?

JavaBen
More...

A higher strike call cannot be more expensive than the lower strike one. It's probably just a stale quote or something.
 
Well, in the morning it wasn't stale. It changed around noon, jumping from about .15 to 4.60. Where it stayed all day.

That's not to say you aren't correct - some sort of problem, but I would have thought it wouldn't go half a day without being caught.

The same problem showed up on three different stocks for me yesterday.

Have a look at the puts for TUES.

I was wondering if the MMs just hadn't decided with the volatility, they weren't going to make a market on that strike.
 
Quote from JavaBen:

on ARCC, Sep 07, the ITM call (strike $15) ask is $2.40, while the OTM (strike 17.5) ask is $4.60! The bid is $0.15 - quite a spread. It didn't look like this when I bought it; it was something like $0.10/$0.20 (bid/ask) at that time (more or less).

What's going on here? Has the market maker just decided he doesn't want to buy anymore of these or what?

It sure screws up my ThinkOrSwim profit calculation on the Monitor screen!

I have several others with this same issue - higher ask for OTM then ITM!

What's going on? Market volatility spooking everybody?

JavaBen
More...

What you are looking at is the ask of each options which is really wide from the bid due to the illiquidity of this underlying and its options. What matters more is where yo ucan get filled not where the ask is since you would never pay the ask on such an illiquid stock. If there is one person looking to sell this illiquid option they may put a high price in to see if it gets filled. It may also have an unusual adjustment which you can look up at the OCC and look up the ticker.
 
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