As of now, TWTR stock price is 15.96. Mar-17-2017 PUT options with strike 19 are currently at 3.00/3.10 (bid/offer). Even the intrinsic value of this option right now is 3.04. How can the bid be BELOW intrinsic value?
They are valuing the puts at about parity, thus to make money a market maker would have to buy them slightly below parity.
Yes, when the put is deep enough in the money. If you buy the stock and the put for parity, you are synthetically buying the same strike call for zero, plus the cost to carry the stock to expiration and commissions. Here the 19 call is only trading for .05. so you can tell they should be pricing the put around parity.
The stock still looks confusing and leads to nowhere. Now it is a bad idea to expect from it something grand.
People underestimate the cost of slippage when trading. The market makers want to earn a living by pricing products so that the bid/ask spread can put food on the table. This spread is much larger when you have a bigger order to fill. A deep in the money put has a delta close to 1 or equivalent move to the stock so there will not be any extrinsic value for the put to sell as the market maker will use the stock for hedging. The option valuation models cant calculate deep in the money options properly and thus you cant use them to compute an implied volatility - it wont work... I have had good success buying these options and using the stock to get out for a profit later when being directional and going out about six months...implied volatilities are over stated with the models.
There are suggestions that Snap will turn out to be much stronger after IPO. Looks like it can overshadow Twitter.