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I bought a LEAP a few weeks ago. Its value swings wildly on my broker's webpage (my broker is my bank; maybe they don't have the best interface.) However the price on the options chain (from NASDAQ) changed little at first, and has remained solid for several days. The 'last' price on the options chain may indicate that I was the last one to buy this option! How can the options chain value of the option remain the same, but my broker price seemingly fall hundreds of dollars per day?

And can anyone recommend a good site to check the current value of an option, though the chain doesn't change? Or is the chain always completely definitive?

  • does the bid/ask change on the NASDAQ quotes? Maybe the bank is just using one or the other, or the midpoint? – D Stanley Dec 18 '18 at 15:35
  • bid/ask has changed slightly over the weeks. The spread may have widened, not sure. the "value" of my options goes down drastically every day "$1,500 lost today") yet the cumulative ("total lost") has gone down much less). – horse hair Dec 18 '18 at 16:02
  • Don't use the last price as an indicator of value. If you had to sell your long option position quickly, you could sell at the bid price. Last price is nothing but history. – Chris W. Rea Dec 18 '18 at 19:14
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Banks tend not to have high level quote systems and yours might not be updating in real time. They may also be providing delayed quotes. A good online broker will post the real time bid and ask which is where reality is.

Many LEAPs have low Open Interest and are very illiquid so the last trade could have been hours or even days ago. That would explain the disparity between an unchanging option price and a changing underlying price. Your broker most likely values the option at the midpoint of the real time quote and it may often be very different from the last trade quote.

A possible reason for the appearance of wide option price swings is if the B/A spread is very wide. A call trading at $3.00 x $4.00 may appear to be up or down a dollar (despite no price change in the underlying) if successive trades occur at the bid and then the ask or vice versa.

For a more specific answer, you'd have to provide the stock and option details.

  • Interesting that LEAPs have low open interest, yet cost much more. Seems to go counter to the supply/demand thing – horse hair Dec 18 '18 at 18:14
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    It's not that simple. The price of same series put and call is linked via arbs called conversions and reversals. Then you have the issue of comparative IV of one series versus another. If that gets out of line, volatility plays become more/less attractive (see earnings announcements). Then there's the possibility of volatility smile (away from the money has higher vols). And if you really want to cut to the chase, the option pricing formula defines a baseline. The supply and demand is more of an issue with B/A spread width. – Bob Baerker Dec 18 '18 at 18:38

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