I placed a trade in PLD for earnings. I sold the 19 APR 115 put and bought the 17 May 115 Put. I was trying to exit the trade today and the market maker was asking 30 cents more for the front month (19 APR) than the back month (17 May). Also, the bid/ask spread was over 1.2 wide for the front month. Now I understand the MM still had the IV jacked up over what it should have been after earnings. Is this because there are still two days left on the front?
Why would a 2 day ITM be priced more than a 30 day same strike?
- Thread starter wartrace
- Start date
Robert Morse
Sponsor
They are just wide market for DIM puts after earnings.
I am kind of new to earnings options trades. Do you think the pricing will stabilize over the next two days (if the stock remains where it is) or should I just suck it up and give up? (I know anything can happen so I won't hold you to what your thoughts are on it) It is only a one lot so no big deal but I want to understand it for the next time.
Robert Morse
Sponsor
They are stable, just wide. You can't trust the midpoint on ITM puts and you need to come up with your own value for the spread. In a few days, if you hold it, you will own stock vs your long put. It looks like the stock moved to far away from the strike and you likely lost money. Spreads like that are hard to value before earnings.