Wonky AIG options prices?

O

optimusPrime

I was looking to buy jan11 puts on AIG and I noticed that some contracts were only good for 5 shares because of the 1:20 reverse split..
But why do those contracts have such a HIGH bid and ask price if they only control 5 shares, shouldn't they be lower than the normal contracts?

example:

2.50 strike price jan 11

............................Bid Ask
100 share contract 0.19 0.24

5 share contract 1.24 1.37

Maybe the 1.24 is the price of the whole contract and not per share.

So the per share on the 5 share contract would be 0.248 bid for example.

That is still high though.
 
The only thing that I can tell you for sure is that the adjusted contracts are for 5 shares :)

But if you take the premium for the adj contract, divide by 5 and subtract it from the strike, it gives you a comparative price as the new standard contracts, give or take a few cents

So in your example, if assigned, you'd buy shares at 2.31 and 2.25, respectively.

I think that's how it works but your best bet is to check it out at the CBOE.com or OCC web sites.
 
the multiplier does not change, just the deliverable does. So if you buy those puts and exercise you receive $250 but only deliver out 5 shares.

So those puts have an effective strike price of $50.

Look at the Jan 2011 puts with regular 100 share deliverable and compare those with 20 of these non-standard deliverables of 5 shares.

Jan 2011 regular deliverable 24.75/25.85 (b/a)

Jan 2011 non-standards 1.20/1.32 x 20 = 24/26.40

from what I could find for Fridays prices...
 
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