My unusual options algo caught a massive mispricing in $HOOD options on Sep 4th.
This is likely because someone leaked their SPY inclusion. The algo did not know this, and neither did I, but I bought vertical spreads in $HOOD for Sep 5 and Sep 12. This is an algo based on option pricing theory and has multiple factors in it, some on the option side and some on the stock side.
Yesterday, the stock acted oddly, but I knew that I needed to be patient. I saw the insane pricing as the 102 call was not coming down toward the close even though it was out of the money. So, after doing a bit of research I realized it is because of a pending decision to be part of SPY and it all became clear to me. I let the spread go without closing it, and kept the one for next week.
HOOD will remain a great stock for trading options on it in the coming days/weeks, so keep a close eye on it.
Here are the receipts:
$HOOD insane option action and a near 100% overnight return
byu/value1024 inoptions
Posted by value1024