Wonky AIG options prices?

Discussion in 'Options' started by optimusPrime, Sep 1, 2009.

  1. I was looking to buy jan11 puts on AIG and I noticed that some contracts were only good for 5 shares because of the 1:20 reverse split..
    But why do those contracts have such a HIGH bid and ask price if they only control 5 shares, shouldn't they be lower than the normal contracts?


    2.50 strike price jan 11

    ............................Bid Ask
    100 share contract 0.19 0.24

    5 share contract 1.24 1.37

    Maybe the 1.24 is the price of the whole contract and not per share.

    So the per share on the 5 share contract would be 0.248 bid for example.

    That is still high though.
  2. spindr0


    The only thing that I can tell you for sure is that the adjusted contracts are for 5 shares :)

    But if you take the premium for the adj contract, divide by 5 and subtract it from the strike, it gives you a comparative price as the new standard contracts, give or take a few cents

    So in your example, if assigned, you'd buy shares at 2.31 and 2.25, respectively.

    I think that's how it works but your best bet is to check it out at the CBOE.com or OCC web sites.
  3. Perhaps because they are in the money. AIG = $36.00 post reverse split; therefore, AIG = $1.80 pre-reverse split.
  4. johnnyc


    the multiplier does not change, just the deliverable does. So if you buy those puts and exercise you receive $250 but only deliver out 5 shares.

    So those puts have an effective strike price of $50.

    Look at the Jan 2011 puts with regular 100 share deliverable and compare those with 20 of these non-standard deliverables of 5 shares.

    Jan 2011 regular deliverable 24.75/25.85 (b/a)

    Jan 2011 non-standards 1.20/1.32 x 20 = 24/26.40

    from what I could find for Fridays prices...