Date:Mon Dec 23 2024Tokyo:1:33Sydney:3:33New York:11:33London:16:33CET:17:33
BinaryOptions.net Forums› Beginners Questions
Option prices as we get further out of the market strikes
coere
Posts: 7 ✭
Posts: 7 ✭
Looking at DECK to place a credit spread as suggested by OptionAlpha.com´s watch list. This was the only security that was not pending an earning report in the next 45 days so I thought it is a good candidate for a trade.
When I went to my trading view to see the option chain and check out the premium differences, I see that as we move out of the money on the strikes (downward) the premiums drop as expected, but then pick up dramatically again. This is not what I expect to see.
I know the liquidity is rather poor on all of these options, and the gap between bids and asks is rather large. And that these are just sellers on the orderbook, but is there something behind this that would be usefull to know and understand?
Does this happen often. What should I take away from this indicator? (see attached screenshot)
p.s. I subscribed to optionalpha because they touted that their super watchlist will automatically find me nice liquid securities and ETFs that are ideal for option trading. I would say seeing the options on DECK (second screenshot), at the strikes that they suggest, that this first experience with optionalpha´s wizbang watchlist is not really positive.
When I went to my trading view to see the option chain and check out the premium differences, I see that as we move out of the money on the strikes (downward) the premiums drop as expected, but then pick up dramatically again. This is not what I expect to see.
I know the liquidity is rather poor on all of these options, and the gap between bids and asks is rather large. And that these are just sellers on the orderbook, but is there something behind this that would be usefull to know and understand?
Does this happen often. What should I take away from this indicator? (see attached screenshot)
p.s. I subscribed to optionalpha because they touted that their super watchlist will automatically find me nice liquid securities and ETFs that are ideal for option trading. I would say seeing the options on DECK (second screenshot), at the strikes that they suggest, that this first experience with optionalpha´s wizbang watchlist is not really positive.
Comments
I see you not only a troll but a moderator of this forum. You have left me no doubt as to how welcome I am here despite having fumbled with my understanding of what this forum is all about. I will forth with remove myself from being in such close virtual proximity to you so as not to pollute your sandpit with my idiocy!
Thanks very much for pointing this out to me.
Please do not take his remark to heart. This forum welcomes all, except trolls or those promoting scam products, which you are neither of. We have responded to your question on expiry settlements in the other post (reposted here).
Welcome to the forum. Your analysis above is largely correct however please note that this forum is for binary options; where there is no underlying. There is time value, but no intrinsic value per say. Time decay does occur and if you early close a binary option you can recover a certain cent on the dollar, but these binary options are just directional bets with no influence on the underlying when the actual transaction occurs (a buy or a sell). There is no overnight carry or transaction fee. Some binary brokers are moving towards a flat transaction cost per entry which is debited immediately upon position entry but that's not mainstream.
Simply put, you are trading American style call and put options, which are real options. Binary options are synthetic. You may be better served on a proper options trading forum. Or feel free to also delve into binaries, they are interesting!
Hope that helps,
Team BSB