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Took2Summit
Registered: Jul 2011
Posts: 401 |
10-12-12 11:13 PM
Quote from turkeyneck:
Don't want to risk assignment. It's only marginally OTM and can go slight ITM with big boys doing the tape painting at the last second before close.
Dude..you just answered your own question right there. Why should you be able to buy it back at 5-10 cents when there is obvious risk involved, if there wasn't risk invovled you would just let it expire worthless and collect your 35 cents
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Took2Summit
Registered: Jul 2011
Posts: 401 |
10-13-12 06:00 AM
Quote from turkeyneck:
For future reference, how do I price this type of "risk" because in theory the OTM option should be worthless?
Im not trying to be rude but you keep contradicting yourself. you just said it should be worthless, but the post before you said you bought it back to avoid people painting the tape..thus not being worthless.
I'm not sure what to tell you other then if you buy a call back you will always pay something, whether it be 1 cent and commission. with aapl being such a high priced stock, it will be more like 35 cents, or if it's decently far out of the money maybe 5 cents.
basically my number 1 suggestion is stop trying to "scalp time premium" on options until you have a much much better grasp of how they operate.
again im not trying to sound like a dick, just trying to give you helpful information
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newwurldmn
Registered: Apr 2011
Posts: 2622 |
10-13-12 01:16 PM
Quote from turkeyneck:
For future reference, how do I price this type of "risk" because in theory the OTM option should be worthless?
If the option were offered at zero, would you buy it?
I definitely would. So would everyone else.
When selling out of the money options into expiry, this "risk" is the crux of your entire strategy.
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FrankSlaughtery
Registered: Aug 2010
Posts: 811 |
10-13-12 01:29 PM
Quote from Took2Summit:
why didnt you just let it expire worthless? options expire on saturday so on friday close there is still value, stock can have an after market news that makes share price go up before saturday etc..
Did you even read your options disclosure agreement???
+1. i've said the below story on other options threads on et re this exact same issue (selling otm calls for "free" premium" esp so close to expiry).
a company (not sure the name anymore) announced it was being acquired at 4:01 EST on expiry day. the problem for those who sold a boatload of otm calls for like 0.05 was that those calls were exercised after the market closed and were worth something like $20. can you imagine selling 1k of those calls friday at 3:30 EST, going home and thinking "another easy day selling premium" then coming in monday finding out you owe 1,000*20*100.
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nazzdack
Registered: Jul 2004
Posts: 8410 |
10-13-12 07:52 PM
Quote from turkeyneck:
----Why OTM call won't go worthless on expiration Friday near close?
----expected it to go near worthless at close.
----I lost money on the trade after factoring in commission when I closed it out....
----expected it to trade at $0.05....
----the bid/ask just won't go my way.
The remaining premium reflects a finite probability that something "weird" can happen from Friday's close to the Saturday,(at noon?), expiration. 
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