5

The link below shows the February 16 call option listing for company XYZ.

I used to think that, the higher the strike price, the cheaper the call option. Obviously, the price pattern for this company (and other companies as well) fluctuates. In particular:

  • $68 is at $0.07
  • $69.5 is at $0.15
  • $70.5 is at $0.18
  • $73 is at $0.12
  • Everything in between is substantially less

My questions:

  1. Why does this trend hold, i.e. why does a call with a higher strike cost more than a call with a lower strike?
  2. Why are there calls, for e.g the $69 strike, that have nobody bidding for them?
  • 1
    Is this real data? If so, where did it come from? Are those last trade prices or based on bid/ask spread? It's odd that the difference between strike prices in not uniform. – D Stanley Feb 15 '18 at 18:40
  • @DStanley Yes indeed this is real data that I got 15 mins ago. As I said, I saw this pattern for many companies. Why would I buy a $70.5 call when the $68 call is cheaper? Is it because NOBODY wants to buy the $68 call so I cannot sell to close? – ToniAz Feb 15 '18 at 18:48
  • @ToniAz Are these options identical in all other ways? Do they have the same dates of expiry? – Grade 'Eh' Bacon Feb 15 '18 at 19:41
  • @ToniAz I'm thinking that those are last trades, not what you can currently sell the option for. Are there bid prices that follow that pattern as well? – D Stanley Feb 15 '18 at 20:39
  • As noted in the answers below, we can guess, or you can disclose the ticker. Which would actually answer this otherwise simple question. – JoeTaxpayer Feb 15 '18 at 22:49
14

Is the price you are quoting the bid, ask, or last?

If this was the last, then the information could be days old. The bid or ask may be up to date pricing but the other side may have no interest at that price.

This kind of thing often occurs when prices are drastically out of or in the money; or very close to expiration.

5

You could be looking at bad data.

You may be looking at the last trade which could have been second, minutes or hours ago.

The B/A spread on these could be wide while the option premium for nearby strikes is narrow. So the last sale at the bid of the lower strike ($0.15) could be lower in price than the most recent buy at the ask ($0.18) of the next higher strike. For example:

$69.50 is $0.15 x $0.25 $70.50 is $0.12 x $0.18

If you provide the symbol, the guessing will stop and we'll be able to tell you exactly why the pricing appears this way.

EDIT: It's the next day during regular market hours. As expected, the bid price of all QCOM calls is lower for each higher strike and higher for each put strike. The only exception is where there is no interest in the option and therefore no bid.

  • One thing that I forget to mention is that the MM can set the bid ask anywhere he wants, meaning wide. It narrows someone comes in with a better bid or ask. This may also contribute to the scenario that you're describing, namely that those strikes with narrower spreads have some bidders. Looking at this in real time should look very different than closing quotes. – Bob Baerker Feb 16 '18 at 1:11
4

The ticker is QCOM

The options you list expire on 2/16. On 2/15 when you wrote your question, QCOM was trading at 65.28. Unless the price jumps 10% tomorrow, those options will expire worthless. I'm not surprised to see some odd numbers for out-of-the-money options with one day to go. If you look at the in-the-money options or longer dated options (e.g. those expiring in March) you'll see more realistic quotes.

0

It's far easier to look at these numbers once more information is disclosed. The ticker was less of an issue than these facts.

  • Stock price $65.28
  • Option expiration 1 day away.
  • Next earnings announcement over 2 months away.

After hours, no bid/asks were shown, but these are the last trades. With one trading day left, there is virtually no value to the out of the money strikes. At the market open today, most of the strikes I listed will show a zero bid price. There are strikes available up to $100. And for what it's worth, the $86 strike still shows last trade at $1.75.

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