Pfizer Call Options Expiring Today 10/16/10

K

KAWill70

PFE was trading at 17.75 a few minutes before the close today (10/15/10), and I was able to Sell 47 October 18 Covered Calls at $0.01 per share.

Why would an option buyer pay even $0.01 with almost no hope of the option being worth anything? The options were $0.25 out-of-the-money.

Also, did the option effectively expire worthless today after the close of the NYSE? Would after-hours trading have any impact on whether an option buyer would exercise?

I assume that the option would need to be exercised today which gives a 1 day settlement to the actual 10/16 expiration date.

Thanks, KW
 
Quote from KAWill70:

PFE was trading at 17.75 a few minutes before the close today (10/15/10), and I was able to Sell 47 October 18 Covered Calls at $0.01 per share.

Why would an option buyer pay even $0.01 with almost no hope of the option being worth anything? The options were $0.25 out-of-the-money.

Also, did the option effectively expire worthless today after the close of the NYSE? Would after-hours trading have any impact on whether an option buyer would exercise?

I assume that the option would need to be exercised today which gives a 1 day settlement to the actual 10/16 expiration date.

Thanks, KW
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lol.

you get the award for worst trade ever.:p
 
You received $47 for this trade less any commissions you had to pay. The risk is that some news comes out before 430 (central time) which causes the owner of the options to exercise them.

Why would anyone buy them? If someone is short them they may free up margin to do another trade by buying them in. Also it would reduce their assignment risk (however small.) I know some brokerage houses wave commissions for this type of trade as well, as long as it is to cover a short.
 
I should have mentioned that selling the Covered Calls opened the position. The position should be profitable even though it is a small amount of money. No commission was charged.

I'm just wondering if some option traders will close their position with a buy rather than let the option expire worthless.
 
Quote from FSU:

You received $47 for this trade less any commissions you had to pay. The risk is that some news comes out before 430 (central time) which causes the owner of the options to exercise them.

Why would anyone buy them? If someone is short them they may free up margin to do another trade by buying them in. Also it would reduce their assignment risk (however small.) I know some brokerage houses wave commissions for this type of trade as well, as long as it is to cover a short.
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Thanks for the explanation.

What is the significance of 4:30 pm CST? I believe the market closed at 3:00 PM CST. Are you implying that they have 90 minutes to exercise the Calls?
 
Quote from KAWill70:

PFE was trading at 17.75 a few minutes before the close today (10/15/10), and I was able to Sell 47 October 18 Covered Calls at $0.01 per share.

Why would an option buyer pay even $0.01 with almost no hope of the option being worth anything? The options were $0.25 out-of-the-money.

Also, did the option effectively expire worthless today after the close of the NYSE? Would after-hours trading have any impact on whether an option buyer would exercise?

I assume that the option would need to be exercised today which gives a 1 day settlement to the actual 10/16 expiration date.

Thanks, KW
More...


:D :D You must have taken my Penny options millionaire course at the Marriot.

http://www.elitetrader.com/vb/showthread.php?s=&threadid=154597&highlight=penny+options
 
Quote from KINGOFSHORTS:

You must have taken my Penny options millionaire course at the Marriot.
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Your link states that "You make money allowing people to close contracts out".

That is what I suspected, but I wonder why that is necessary in most cases. Maybe it is what FSU stated about not wanting to be exposed to risk which apparently carries for another 90 minutes. A few Calls would not free up much margin but I guess a large quantity would.

Today I checked a few other stocks near the close, and many had no bids at all to buy Calls modestly out of the money.

FSU - It looks like I took a little more risk than I realized, as I didn't know that the buyer had another 90 minutes to exercise.

This trade was partly for curiosity to see if the order would be filled. Yahoo Finance showed very little volume in the option which was not correct. My brokerage showed higher volume and my order executed immediately. I'd guess that more Calls would have been purchased if offered. I was not able to see any Size on the bid.
 
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