So I had opened a call ratio a few weeks back on FNSR SEP 6 expiry with intention of closing this week ahead of earnings. When I started trying that on Tuesday it appeared that the bid-ask on all the near term options is something like 0.10$ - 4.90$ With great difficulty I managed to close the short part of the ratio but despite trying at all prices up to intrinsic value I couldnt close the long call SEP6 21.50$ strike position. So it had to be held through earnings - not my intention but I reckoned after earnings there might be a market again. However this morning again the spreads are still the size of the Atlantic. I am now kind of stuck on what to do - it seems to make the most sense to short the stock and just let it go to expiry. However I never envisaged a short position of that size and so havent got the margin ready for it. I am really surprised the MM can keep the market sewn up for so long. Not sure if anyone can shed a light or suggest a step to take but any input is welcome.
The market makers rule the stockmarket. Like it or not, there is manipulation by market makers to pay as little on the bid side while, selling as much and as high on the sell side. They make their monies on the bid and ask spread. Options with low open interest can be easily controlled by the market makers. You can minimize it by buying options only on those strike prices and stocks with high open interest. If your trade goes against you, you want to be able to get out as soon as possible and at relatively, fair prices.
I am just a buck and a half off the mid - so not really far out. The spreads on FNSR are just impossible.
Are you aware FNSR is being acquired by IIVI? In cases like that, options are especially illiquid. Your option was 5% in the money expiring today. Plus vol is low because it moves as 40% of IIVI. Intrinsic is the fair price to get filled at. You're right that shorting the stock would have been the best way to close it out if you had the margin.