Scalping OTM time premium near close on expiration Friday

Discussion in 'Options' started by turkeyneck, Oct 12, 2012.

  1. Why OTM call won't go worthless on expiration Friday near close? I tried to scalp time premium on AAPL Oct 12 630 Call (sell to open for $0.35 at 15:33 ET) and expected it to go near worthless at close. The stock traded under 630 but the option was still trading near my entry point at close. So I lost money on the trade after factoring in commission when I closed it out at market at 15:59:XX ET. I expected it to trade at $0.05 or $0.1 at most at close but the bid/ask just won't go my way.
     
  2. 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???
     
  3. excellent!
     
  4. oh and i just read this a little more clear, even on weeklies you can't buy it back there will always be a spread, need to let it expire worthless.
     
  5. I have sold weekly options at OPEx
    .no mm is gonna post an offer for a close to the money for .05 cents or anywhere near their on high dollar stocks... if the UL is anywhere near the strike your selling... still time & risk left
     
  6. 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.
     
  7. 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
     
  8. For future reference, how do I price this type of "risk" because in theory the OTM option should be worthless?
     
  9. 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
     
  10. 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.
     
    #10     Oct 13, 2012