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who would buy an option on an underlying sold by the same people that control the price of the underlying? if continental sets the price of the seats and then s
by andylei 15y ago
who would buy an option on an underlying sold by the same people that control the price of the underlying? if continental sets the price of the seats and then sells you calls or puts on those prices; why would anyone buy those options?
- gaius 15y agoThe way airline seat pricing works is say you have 200 seats on a plane, you might pick 4 prices and sell the first 50 for the lowest, the next 50 for the 3rd lowest and so on. This is why seats seem to get more expensive closer to the date of the flight, tho' it is not really based on time but demand. To make this valuable, the price difference of the next band up must be more than the option - but I agree that this is a gamble unless you know the inventory well.
- deleted 15y ago[deleted]
- bonzoesc 15y agoYou could know the inventory pretty well with FareCast[1] and ExpertFlyer[2]. Paying a few bucks to lock in a lower fare before prices skyrocket at the last minute seems quite reasonable. 1: http://www.bing.com/travel/ http://www.bing.com/travel/ 2: http://expertflyer.com/ http://expertflyer.com/
- ssharp 15y agoThey are selling you an option for a few bucks to lock in pricing for seven days. Since airline prices change several times a day, if you're paying attention to prices and notice them drop, but can't book for some reason (maybe you're booking for others and need their approval first), it's not a terrible deal. But the option is only for buying a ticket from Continental within seven days. It's not like if prices go up, you can sell your option to someone else and pocket the difference like you can with traditional options. Since the tickets are most likely tied to non-transferable fares, their function is pretty limited.