Date:Sun Dec 22 2024Tokyo:15:59Sydney:17:59New York:1:59London:6:59CET:7:59
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GOOG Options
psdubl07
Posts: 2 ✭
Posts: 2 ✭
I have a question for experienced options traders. I'm looking at January 2015 Calls on GOOG at a strike price of $1,000. They're currently selling for about $100 per contract. (A little less, but let's round to $100 to make it easy)
Now, I understand the risk of selling uncovered calls, especially for a stock with such a high price. But if I'm understanding this correctly, someone is willing to pay $10,000 for one contract giving them the right to purchase GOOG at $1,000, meaning it would have to nearly double from the current price, ~$520, in only a 3 month window? Am I missing something?
Conversely, TSLA January 2015 Calls at a Strike Price of $400, (about double the current stock price as well), the last trade was .13 with a B/A of .13/.39 So even at the Ask, the cost is about .1% of the underlying stock price, while the cost for the GOOG contract is about 19% of the underlying stock price.
Again, am I missing something? Am I crazy to think I could sell 1 uncovered GOOG call and make $10,000 with a very small risk of the option ever being exercised?
Now, I understand the risk of selling uncovered calls, especially for a stock with such a high price. But if I'm understanding this correctly, someone is willing to pay $10,000 for one contract giving them the right to purchase GOOG at $1,000, meaning it would have to nearly double from the current price, ~$520, in only a 3 month window? Am I missing something?
Conversely, TSLA January 2015 Calls at a Strike Price of $400, (about double the current stock price as well), the last trade was .13 with a B/A of .13/.39 So even at the Ask, the cost is about .1% of the underlying stock price, while the cost for the GOOG contract is about 19% of the underlying stock price.
Again, am I missing something? Am I crazy to think I could sell 1 uncovered GOOG call and make $10,000 with a very small risk of the option ever being exercised?
Comments
Hit me up on skype at Brymcafee (McAllen TX)
www.tradingaxis.com
"These are options that don't have the standard terms of an options contract, namely 100 shares as the underlying asset. They are normally created as a result of a specific event, such as a merger, acquisition, spin-off, extraordinary dividend or stock split. As a result of the changing circumstances, the contract is adjusted to be equitable to both the option buyer and seller by equating the new underlying asset(s) of equal value as the owner of 100 shares."
"Each situation is unique and therefore non-standard. This makes them difficult to understand, and therefore risky to most investors."
"As an example, when Bank of America (NYSE:BAC) took over Merill Lynch, the owner of 100 shares of Merill received 85 shares of BAC stock plus $13.71 in cash. NS contracts of BAC now would deliver 85 shares of BAC + the cash, as opposed to the standard contracts, which represented 100 shares. The obvious rule is avoid all non-standard options. These contracts will also show odd strike prices and different root symbols."
After some more digging, I found out because of the stock split earlier this year, owners of Google Class A shares —ticker symbol GOOG— received an equal number of new Class C shares. Class C shares keep the GOOG symbol, while the Class A shares now trade under the symbol GOOGL. The difference is in voting rights.
Back to my original question. The NS contract I'm looking at is for 100 shares of GOOG PLUS 100 shares of GOOGL. The aggregate price of those underlying stocks currently sits at about $1,050. What's maddening about this though, is that at least in TD Ameritrade, this contract is showing under Out-Of-The-Money, when really it's In-The-Money, hence the cost of the contract.