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Looking at the option chain I see short term (30 days) deep out of the money calls with volume for strike 55 with volume at 16, with Bid/Ask at 0.30/1.00:

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However, the time and sales window notes two transactions that makeup that volume measure:

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As evidenced from these two transactions, the first (at 10:36am) transactions bid/ask market spread is 0.45/1.00 while the second (at 10:40am) is 0.40/0.45.

why and how can the the respective transactions markets be so different? Is this evidence that one is Sell to Close, the first at (at 10:36am), and the other is Sell to Open, the second (at 10:40am)?

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With stocks, at the end of the day, traders pull their orders because they don't want any after hours surprises. Options behave similarly except that they don't trade during after hours. In both cases, the B/A spread widens, perhaps very little with very liquid options like those of the SPY and for those that trade by appointment (illiquid), the spread can be Holland Tunnel wide like the one that you observed. When the market opens in the morning, the B/A spread remains wide until competitive orders are submitted and then the the spread narrows. Don't read anything into the wide spreads. They're not transaction only a lack of existing orders.

  • Do you believe the first at (at 10:36am) was a Sell, given at the Bid price, and the second (at 10:40am) was a Buy, given at the Ask price? – Sauron Jul 17 '18 at 18:44
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    99.99% yes. Be aware that one leg of a spread order can be filled at the bid, at the ask, anywhere between the B/A and far outside it as well. So while it is most likely as you suggest, it's not 100% guaranteed that it is so. What's your end game here? What are you trying to discern from the option chain data that will help you make money? – Bob Baerker Jul 17 '18 at 19:54
  • Very curious this chain. Yesterday someone bought over 300 deep out of the money calls, strikes at 55, presently at 43, no indication of a spread on ANY other leg given the very high volume out of the ordinary. ~30 till expire, the underlying has NEVER traded above $53...I think something is fishy here – Sauron Jul 17 '18 at 20:01
  • What do you think? Someone just gambling with like ~300 * $0.45, $14,000? – Sauron Jul 17 '18 at 20:10
  • As I mentioned yesterday, call buyers could be doing 4 things: (1) closing existing short call positions, (2) opening bullish positions, (3) buying this as one leg of a bullish or bearish spread, or (4) Short sellers of stock hedging the upside by buying long calls – Bob Baerker Jul 17 '18 at 21:11

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