Weird Spreads on Options

Discussion in 'Options' started by Antartica, Oct 11, 2018 at 5:52 PM.

  1. I noticed that far out of money options can have insane spreads. While I am writing this (market closed):
    RUT Oct 31C 1720 has 9.0 ask and 0 bid.
    RUT Nov 2C 1715 has 0.65 ask and 0.25 bid.

    It will change once the market is open but the price swing was massive.

    Who the hell makes these prices? What makes back option so much more volatile?
     
  2. Ayn Rand

    Ayn Rand

    Normally a wide spread is indicative of a low volume contract. And if it was today wide b/a spread is also an indication that no one knows what is going to happen. It is an additional proxy for volatility. 9 ask 0 bid seems like a glitch. Or no one was awake who wanted to buy it.
     
    tommcginnis likes this.
  3. tommcginnis

    tommcginnis

    You can stick your nose in at $8 Ask and you'll see one-or-both sides tighten up quickly. (I always think of it as pissing off somebody, somewhere ... "Aw! Whatter ya doon! I'm sleepin' here!" :rolleyes:
     
  4. Thanks. It is a glich. It happened before. Makes things ugly.
    Just curious if my broker has those contracts and trading against me. Not sure what regulations are like in Canada.
     
    Last edited: Oct 12, 2018 at 2:55 AM
  5. Sig

    Sig

    If the market is closed, whatever is showing as a bid/ask is essentially a random number so you would just ignore it. Even with open markets though, if no-one wants to buy or sell something at that moment in time, including market makers, you're going to see the first limit order there which could be a long way from mid. Not a glitch, it's just how markets work. Check out SSFs, most have no bid or ask at all.
     
    Reformed Trader and tommcginnis like this.