0

Is there any conceivable way in which an OTM option's value will decrease or (will not move, for that matter) as the underlying moves in a direction that gets the option closer to the money, aside from decay attributed to time value?

If so do you know of any examples in which this has ever happened?

Improve this question
4
  • Volatility collapse. An example would be after earnings.
    – Optionparty
    Commented May 9, 2016 at 19:26
  • what about for long term options of about a year which include 3 or 4 earning's dates, would they experience the same effect?
    – ak87
    Commented May 9, 2016 at 19:30
  • just to a lesser extent, but yes
    – CQM
    Commented May 10, 2016 at 0:22
  • When demand is higher the risk gets higher, so the price goes higher.
    – Optionparty
    Commented May 10, 2016 at 2:07

1 Answer 1

Reset to default
1
  1. Lack of liquidity in the options market (wide spreads)
  2. Decrease in volatility.
  3. Decrease in demand (or reduction of implied volatility)

Examples

  1. Look right after the open or a few seconds before the close.
  2. After the stock has made a big run up in price.
  3. After an earnings announcement.
Improve this answer

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .