SPY options bid ask spreads

[cafeole]

I like to daytrade the current SPY option expiration. The spreads, up until now, have been good and only widen marginally, if at all, when the price moves.

However, the last week or so I have noticed much wider spreads and if I do find an acceptable spread and the underlying goes my way the spread widens to the point I can't any money on the move.

I understand about yesterday, the IV was over 100. I don't understand the other days.

Can anyone explain this?

 

[qlai]

Look at how fast the underlying (SPY) is moving ... blazing through levels.

 

[cafeole]

I know, but the ask moves, just not the bid.

 

[qlai]

You sure it's not your platform?

 

[cafeole]

I am not sure of anything.

 

[cafeole]

It could be that all the volume is on one side.

 

[prc117f]

Look at how fast the underlying (SPY) is moving ... blazing through levels.

I sold short 245 calls a few weeks ago. Never did I think it would pierce the strike price.

 

[qlai]

 

[Ayn Rand]

Bid ask spread is a function of expected intraday volatility. When no one knows what is going on the bid ask spread gets larger.

"I know, but the ask moves, just not the bid."

When a market maker sells an option, money is made. When you buy an options you only make money when you sell. Market maker knows this. Market maker is primarily on the bid side.

In a very fast moving market, market makers will slam the bid down and leave it there. If you are a sucker you will take it.

In many cases, closer to the close the bid will come up.

 

[qlai]

In a very fast moving market, market makers will slam the bid down and leave it there.

How far down? Wouldn't the market maker need to re-price as the underlying moving down fast? I can't imagine the bid not moving in fast markets. There should be multiple MMs. How far OTM is the option? Just trying to learn something while we are on the subject.