Options Fills on Bid/Ask Spreads

Just out of curiosity, why do you want to own a LEAP that far out? Is it some component of a strategy, or are you just basically long-term bearish?

 

no I shorted the put, not a long put position. I might not necessarily hold the short position open all the way to expiration but I am short some vol due to the high vega of the LEAP to 2014.

 

Hmm... are you protecting yourself in any way?

 

Bid is 61 cents higher than the offer, weird option pricing, LOL. Not sure where you got 39 cents anyway. If that is just a typo, then simply don't trade with 39 cent spreads. Never trade stocks even one fourth that wide either.

Don

 

oops It was a typo I messed up when I posted. It was 21.83 bid and I was the ask 22.22

 

I guess I must be mis-understanding what you are trying to accomplish, but I don't claim to be an options expert by any means and when I sell something, it's usually just to capture theta or as the hedge part of a spread.
Couldn't you do what you are trying to do with the nearer term LEAP (Say June/Sept/Dec 2012?). The spread is like 1/5 of those long term LEAPS and theta is a bit more helpful to you.
If you say you are short vega, doesn't that mean you are short volatility in a low volatility environment? I don't expect huge upside spikes, but I can certainly picture some big downside spikes (which would hurt your position).
Not dinging your position, btw, just keeping myself educated.

 

haha yeah that option pricing is a little off to say the least. my mind immediately recognized the arb opp. the quote is stale/bad/both.

 

I sold OTM calls on my long stock position (SPY average price 120.55) the 150 call expiring this year. when SPY was close to 138.

so I wanted to balance it out a little with the short put when we hit a hard landing and vix popped up.

The theta between the contracts .18 Vs .102 and deltas were close, although the nearer term one had half the vega and gamma was higher but not a huge amount.


Interestingly enough volume yesterday was 4, today it jumped so far to 43.

Why would those put trade in a higher volume today than yesterday.

anotherthing I noticed, the IV is higher on the OTM puts than the ATM/ITM puts for the 2014 DEC contracts. Why is this?

Still learning myself.

 

Implied is generally higher on OTM than ATM options.

And, of course the gamma is higher on near terms, fewer days until expiration.

Don

 

Maybe I am confused, but if you sell an option with a higher IV, does that mean you are getting a better risk compensation?

Since an ITM or ATM option has a higher theoretical risk of assignment and the option being in the money or deeper in the money, why would the IV be lower?

VS an OTM put. thanks for your help.