adjusted series

Discussion in 'Options' started by StasDesy, Jan 18, 2007.

  1. StasDesy


    Does anyone trade them ?
    Jan 40 puts are now selling for over 3.50. The chances of SNDK diving below 40 by tomorrow's expiration are slim.
    What do you guys think about it?
  2. MTE


    "Adjusted" means that they are not standard, which implies that they have some special terms attached making the pricing seem "off". Without looking at the options or the adjustment notes I can tell you that those 3.50 are not a free lunch. The market makers are not stupid, they don't hand out cash. if those puts are worth 3.50 then there's a darn good reason for this.

    So make sure you understand the terms of those options before jumping in!
  3. The SNDK adjusted contracts (root symbol CEU) are for 76 shares of SNDK plus 16.04 in cash. That values a contract in the vicinity $3,320

    If you look at the various about to expire January CEU options, the premium will look large because of this valuation but in reality, they are trading near parity. Any drop in SNDK will hurt you if you sell the jan 40 puts, thinking it's easy money.

    There are no free lunches! :)