option prices off

Discussion in 'Options' started by starvingtrader, Nov 17, 2011.

  1. Every now and then, I see option prices way off. Here is an example for Avon (AVP) on Oct 27th. I don't remember if this snapshot was taken while the market was open or closed. These quotes are for spreads, but the question still applies. The spread prices for November, December and the following January were roughly the same. (I tried to attach a screenshot)

    Nov 18/19 put spread - 0.475
    Dec 18/19 put spread - 0.45
    Apr 18/19 put spread - 0.475

    I know that the bid/ask quotes can get real stale at certain times - for example after the market. I also understand that the comparisons of the midpoint of the bid/ask of different spreads can be off during some specific times, such as:

    - when you are comparing options that have huge spreads
    - a spread that have a negative theoretical bid (-.05 bid/.15 ask)
    - spreads that are small - i.e. a spread trading at .05 might worth less than a .025 spread

    But none of these scenarios seem to apply to this case. Most of the time these case seem to be where the same spreads from different months seem to be trading at the same price. In other words, a 19/20 spread that is 2 months out will trade at the same price 3 months out.

    * As a side question... if the above case, couldn't you just sell the 2 month spread, then buy the 3 month spread, and then have a "free" debit spread since the premium you sold paid for the premium you bought?
     
  2. spindr0

    spindr0