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# Newbie Question regarding option pricing

Discussion in 'Options' started by Neyo, Jun 8, 2013.

1. ### Neyo

Hi guys,

I just have a question regarding option pricing.

i recently sold(on my demo account):
Short SPY weekly OTM put option, expiration 7th of June, at strike 160.00, premium received 0.18, and quantity 10 contracts.

by equation this should amount to : 10contracts * 100 shares per contract * premium 0.18 = 180\$ profit if price is above 160.00

on the day of the expiration the Bid/Ask of the option was 0.00/0.01, yet the profit i could take if i close the option immediately was only 17\$, instead of the 180\$ calculated if i waited for the option to expire.

i know this is a completely newbie question but i can't seem to figure it out or find online why the pricing is this way. i don't understand why, if i close 10contracts by the difference of 0.17(0.18 - Ask0.01=0.17), i only receive 17\$ instead of 170\$.

if someone could explain this to me i would be very grateful because i can't seem to find an answer online.

2. ### DTB2

If you would just let it expire, you would retain the \$180 premium and not incur another commission cost.

3. ### Neyo

thank you for the answer, but the commission per contract trade is 0.95\$(in this case, since it is 10 contracts, it would be 9.5\$), wich is still a long way from 170\$.

4. ### Jgills

is it showing you the pnl per contract? in which case you would make 17 ten times, or 170.

5. ### Neyo

i tried closing only one contract and the profit was 1.7\$, with the commission of 0.95\$...so it is was meant for the whole 10 contracts, and this is why i can't figure it out.
it is a demo account, is it possible that that has something to do with it?

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