SPX Expiration

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devilfishlane

03-18-10 04:15 PM

I am holding an Iron Condor to expiration until tomorrow morning. The call side is 1165 - 1175, and the SPX closed at 1165.83. As I understand the SPX options close at the open tomorrow, which will be ,as of now, 1161.10 with futures built in. Any chance my SPX Iron Condor will expire under 1165 ?

Thanks for your time
 
Quote from devilfishlane:

03-18-10 04:15 PM

I am holding an Iron Condor to expiration until tomorrow morning. The call side is 1165 - 1175, and the SPX closed at 1165.83. As I understand the SPX options close at the open tomorrow, which will be ,as of now, 1161.10 with futures built in. Any chance my SPX Iron Condor will expire under 1165 ?

Thanks for your time
More...

The expiration price for SPX is based on the Friday opening price of each of its component stocks. So, although SPX closed at 1165.50 the expiration value can be higher than that or lower, depending on how things go tomorrow. So yes, the bear call spread side of your iron condor *might* expire worthless. Or you might find out tomorrow that it has $3 of intrinsic value, if there's a gap up. A roll of the dice.
 
I hope you collected a really healthy premium for that IC, and I also hope it isn't a large fraction of your overall portfolio!! It is possible that the SET will be below 1165, but it's about a 50/50 bet it will be higher. The problem for you is that it easily could be $5 higher. In that case, it's $500 for every spread you have written.

Let me ask you a question or two--(I'm not asking this for me, because I can find the answer in a few seconds):

1) What would it have cost to close the spread?

2) If you had had no outstanding spread, would you have opened this position with 15 minutes to go in the trading day today?

Given that, did you make the right decision????
 
I understand what you're saying. I got caught on this one. I should of bought a call to hedge , a few weeks ago for about $400. But I didn't think the market would make this manipulated run up so fast. The prem is for $2200. Will learn from this . My trading acct is about 55K at this point. This was the third IC in my short side career,so far. The other 2 went fine. Closed one with 60% and the other 80% of the prem. I'll post tomorrow the final P/L
 
Quote from devilfishlane:

03-18-10 04:15 PM

I am holding an Iron Condor to expiration until tomorrow morning. The call side is 1165 - 1175, and the SPX closed at 1165.83. As I understand the SPX options close at the open tomorrow, which will be ,as of now, 1161.10 with futures built in. Any chance my SPX Iron Condor will expire under 1165 ?

Thanks for your time
More...

The SPX settlement value has very little to do with the Thu close or where the futures are. As it has been mentioned, the settlement value is calculated using the opening print for each of the component stocks, which means that the value can be dramatically different from the regular SPX values like Thu close and Fri open/high/low (i.e. it can be higher than the high for the day or lower than the low for the day).
 
Quote from solk:

How can I know what was the final expiration quote for the SPX this morning?
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I think its 1172.95. I think you can find it on the cboe web site. Jim
 
Quote from solk:

How can I know what was the final expiration quote for the SPX this morning?
More...

The price is posted at noon here:

http://www.cboe.com/data/Settlement.aspx

Looking at the charts, SPX in the first minute opened at 1171.80 or so (a large gap up from yesterday's close), and has since collapsed to 1161. The expiration price used for option settlement is not based directly on SPX but rather by using the first posted price of each stock that makes up the index. Still, this looks bad for anybody short either the 1165 or the 1170 calls. My guess is that the market makers were long a bunch of 1170 calls and wanted to make sure they didn't expire worthless. We'll know for sure what happened in a couple of hours.
 
Looks like the poster before me got the closer number. The official expiration price: 1172.95

Given the size of the spike (+7) followed by an immediate crash, you'll have a hard time convincing me this wasn't manipulated for the benefit of the guys long calls or short puts at 1170.
 
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