The problem with unwinding deep in the money options…..
INFINITE GAMMA
INFINITE GAMMA
What If You Guessed Really Right?
- Thread starter Arnie Guitar
- Start date
Lol, and to think... if @TheDawn came up with a theory about infinitesimal gamma instead, he could've sounded smart.
Yes you can sell your deep in the money option. What most of the responders so far have not alluded to is that there is a marker maker who will take your order. Unless it is a very active traded option much of the time you are selling to a Market Maker and not a retail buyer. The bid and the ask may be wide and the bid may be under intrinsic value but if you put in a limit order a little over the intrinsic value you will get filled. I have no experience in an extreme example like this so possibly you make have to go slightly under intrinsic value so the market maker can make a buck.
I notice on option spreads when I have the full max value I have to give the market
maker a buck to take it. On a $5.00 spread he will generally give me $4.99 but sometimes I have to go $4.98 to get filled.
One piece of free advice, (unless it is SPY with a one or two cent spread) never sell to the bid or pay the asking price. You almost always will get the midpoint on a limit order or very close to it.
I notice on option spreads when I have the full max value I have to give the market
maker a buck to take it. On a $5.00 spread he will generally give me $4.99 but sometimes I have to go $4.98 to get filled.
One piece of free advice, (unless it is SPY with a one or two cent spread) never sell to the bid or pay the asking price. You almost always will get the midpoint on a limit order or very close to it.
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I've seen people refer to that as the 'Mark' price, but that can get confusing fast since different markets & derivatives use the Mark for something else...
Actually @taowave this happened quite often in my type of trades. Like @The_Krakenite said when it is deep ITM, sometimes there was not a lot of time value and it moves in tandem with the underlying. So, when the time comes (usually before expiration) to take profit, I sometimes offered the MM slightly below intrinsic (a little free money
) and got out. With some volatile underlying, less is sometimes more.Glad to see you are still around, must be doing well.
They need to be fed, otherwise, who is going to take my other side? Besides, when the spread is a mile wide, if I exercise then sell the underlying, the spread is likely still a mile wide, so they take their cut one way or another. Us little guys can't win.
Hi there,you are back!!
Hope all is well!!
Trade stock first,then exercise..
if you get your stock off,exercise option,what spread is there??
Hope all is well!!
Trade stock first,then exercise..
if you get your stock off,exercise option,what spread is there??
Glad to see you are still around, must be doing well.
They need to be fed, otherwise, who is going to take my other side? Besides, when the spread is a mile wide, if I exercise then sell the underlying, the spread is likely still a mile wide, so they take their cut one way or another. Us little guys can't win.
OK, thank you again for the coaching.
Yes, @taowave I am back. Quit trading since about two years ago to take care of a family issue. Also, every decade I change my focus and interest, it was time to change.
I did occasionally peaked at ET and finally, late last year, tiptoed back to trading, now as a hobby. To my surprise, I did well.
@Arnie Guitar, my apology for hijacking your thread.
Yes, @taowave I am back. Quit trading since about two years ago to take care of a family issue. Also, every decade I change my focus and interest, it was time to change.
I did occasionally peaked at ET and finally, late last year, tiptoed back to trading, now as a hobby. To my surprise, I did well.
@Arnie Guitar, my apology for hijacking your thread.