I am looking at MDB LEAPs. Right now the price of the stock is up about 7% from open. Some calls are up, and some puts also show up, which I guess is because they haven't traded today (I am using barchart.com as the reference.) So I think what I am seeing is not the true price (some calls are still "down" even though the stock price is up.)

If I want to buy an option that hasn't traded today (or during the past few days), do I have to guess the price (or try and derive it via a model), or do I have to wait for someone else (a market maker) to establish the price?

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    Presumably you can make an offer to buy, and see if any seller is willing to sell at your price.
    – The Photon
    Jun 5, 2019 at 18:14
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    Are you familiar with Black-Scholes? Jun 5, 2019 at 19:47
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    @Acccumulation - that's the 'model' I mentioned above. I just didn't type it out because I didn't know off-hand how to spell 'Scholes'. I thought about typing 'BS' but that has negative connotations Jun 5, 2019 at 22:24
  • The puts could also be up because of higher IV (implied volatility)
    – 0xFEE1DEAD
    Jun 6, 2019 at 22:45
  • Black Scholes does not apply to 'American' style options that can be exercised prior to expiration (only 'European' at expiration options). For those options a different (more complex) model is needed, e.g. Cox-Ross-Rubinstein. Index options are typically 'European' while single stock options are typically 'American'.
    – xirt
    Jun 7, 2019 at 3:54

3 Answers 3


The reason that the calls appear to be down is because due to lack of trading, the last price occurred yesterday or earlier at a lower stock price. For example, the Jan '21 145c is $45.30 x $47.40 with a last trade of $39.90 . It's a stale quote.

There are lots of issues with these LEAPS. They have low Open Interest, most haven't traded today, the few that have traded are in single digits, the IV is high and the B/A spreads are Holland Tunnel wide. That's a recipe for disaster unless you work the numbers.

The starting point is to determine the midpoint of the spread. For the above option, it would be $46.35. But just to be sure, put that price in a pricing model to make sure that the IV lines up with that of the other options and the average implied volatility for that expiration.

For a somewhat liquid option, the midpoint might be a reasonable price to get a fill, should a counter party show up. For LEAPs like these that trade by appointment, it's possible but not likely.

With B/A spreads like these, you really need to have courage of conviction to buy these LEAPs at the market price. If the call is ATM with approximately a delta of 50, the underlying will have to move up $2 for every $1 of spread that you pay in order to break even.

  • If I believe that this stock is over-valued and will correct in the near-long-term, are LEAPs still the best strategy? They're unattractive as you've pointed out, but is there an alternative? Jun 5, 2019 at 19:07
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    The best strategy depends on the size of the move and in what time frame and that can't be known in advance. In a high IV situation, I'd utilize a vertical or a diagonal somewhere near the midpoint in order to offset some/all of the inflated premium. That's fine if the stock cooperates but if it makes the big correction move that you hoped for, you'll wish that you had just overpaid for long puts. A dollar wide spread isn't nice but catching a 10-20-30+ point move will soothe the pain. Jun 5, 2019 at 21:10
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    Thanks Bob. Your advice here is always golden. Jun 5, 2019 at 22:25

There is no "true price". There is the last price an option traded at — but as you have discovered, if a particular option is thinly traded (and many options are thinly traded) then the last price quickly gets stale and isn't useful for informing what price you might actually fill at for an order you're contemplating.

You need to look instead at the quoted bid and ask prices. If you want to buy an option, you would likely end up paying the quoted "ask" price if you were to enter a market buy order. If you want to sell an option, you would likely end up getting the quoted "bid" price if you were to enter a market sell order. You can also enter your own price in a limit order (and now the other answers do a great job of describing why you may or may not get filled at your own price).


Determining the Price

Ideally a model would be the best way - some trading platforms offer them though they may not be as sophisticated as say, the ones the market makers use.

However, in order for a trade to occur, two parties need to agree at the same price, and even if your bid may be at the theoretical price, a market maker might need a minimum amount of profit to cover themselves for the risk involved in the trade.

Increment Slowly

You don't need to necessarily hit the offer - if your bid is competitive, a market maker may trade with you (hit your bid) even if they are offering at a higher price. You don't also have to price in nickel increments, many options exchanges (e.g. BATS Options and NASDAQ Options) allow pricing in penny-increments, even if penny prices are not displayed on the market data feeds. You can put in a low bid and over time, increment it slowly. The theoretical price will also change as the underlying moves.

Request Pricing

You also have the option of calling your broker, who can call the exchange to ask a market maker to post a competitive quote in that series. However placing a low bid may have the same effect (as it will tell the market maker there is actually someone interested in trading this series).

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