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This was expected, since the price of stocks tends to get "pinned" to expiring options, which expired today. I was talking to one of my friends about AAPL bein

by kjackson2012 14y ago

This was expected, since the price of stocks tends to get "pinned" to expiring options, which expired today. I was talking to one of my friends about AAPL being pinned at $500 yesterday. The closest strike price for options expiring today, with the highest open interest, was the 500 strike price. If I remember correctly, there were 30k+ contracts at this price. On Thursday night, those options were priced at around $4.95, or $495 per contract. There was a great deal of incentive for market makers to pin the price of AAPL at $500, rendering all those options worthless. Looks like it worked.

mercuryrising 14y ago
Can you more generally explain what your comment means? Here's my stab (way off I'm sure): So some people have options of Apple's stock. They have to buy 100 shares for every option (contract) they have. The options make interest from when they were offered, and they have to make a decision (strike price) when a certain stock price is reached (is this determined by the company offering the stocks?). As Apple's stock was more expensive at the time than the options, there wasn't an advantage is taking up the options?
- thingylab 14y ago
  Wow wow wow. This whole "prices are pinned around a strike" story does not make any sense. First, a quick search on bloomberg reveals that stocks belonging to the S&P 500 (with liquid options) do not tend to close at exactly the most liquid option strike price on expiry dates, so a close at 500.00 is not "expected" for AAPL, or any other stock, today. Second, if you'd take 30 seconds to look up what an option is, you'd discover that option can be either calls or puts (options to buy or sell, respectively) so when the spot (market) price of AAPL is 495 at expiry, the 500 call is worthless, but not the 500 put is not. Third, the market for options is not the only one responsible for the spot price, if only because a lot of people actually trade AAPL stocks independently of AAPL options. Finally, most people who trade options do not give a damn about the spot price, instead they care about the (implied) volatility. Roughly, it means your profit/loss on an option position is largely immune to the moves in the underlying stock price (just look at people hedging variance swaps).

mercuryrising 14y ago

Can you more generally explain what your comment means? Here's my stab (way off I'm sure): So some people have options of Apple's stock. They have to buy 100 shares for every option (contract) they have. The options make interest from when they were offered, and they have to make a decision (strike price) when a certain stock price is reached (is this determined by the company offering the stocks?). As Apple's stock was more expensive at the time than the options, there wasn't an advantage is taking up the options?

thingylab 14y ago
Wow wow wow. This whole "prices are pinned around a strike" story does not make any sense. First, a quick search on bloomberg reveals that stocks belonging to the S&P 500 (with liquid options) do not tend to close at exactly the most liquid option strike price on expiry dates, so a close at 500.00 is not "expected" for AAPL, or any other stock, today. Second, if you'd take 30 seconds to look up what an option is, you'd discover that option can be either calls or puts (options to buy or sell, respectively) so when the spot (market) price of AAPL is 495 at expiry, the 500 call is worthless, but not the 500 put is not. Third, the market for options is not the only one responsible for the spot price, if only because a lot of people actually trade AAPL stocks independently of AAPL options. Finally, most people who trade options do not give a damn about the spot price, instead they care about the (implied) volatility. Roughly, it means your profit/loss on an option position is largely immune to the moves in the underlying stock price (just look at people hedging variance swaps).