Hi everyone,
I'm trying to understand something that's confusing me about HAL (Halliburton) options. I want to buy puts on the stock (cause I need to close a position already opened), but I'm seeing something that doesn't make sense to me.
At the $35 strike price, there is no bid and the ask is only $0.05. But at the $34.50 strike — which is actually lower — there is also no bid, yet the ask jumps up to $0.75.
Shouldn't a lower strike put be worth less, not more? Why would the $34.50 put have a higher ask than the $35 put?
I'm a bit lost and would love if someone could explain what's going on here. I don't know if you could suggest some resources to understand better.
Thanks in advance!
Posted by Admirable-Log-8346
5 Comments
Its asking price. Meaning no one will bid. Like you ha car of old model and asking exorbitant price. No one can stop you to ask but no one going to pay either. That’s why no bid for that option.
It’s because there’s not much volume that far out of the money for the time period left. It would have to fall about 14% in 3 days to be around those strike prices + whatever premium cost was. So it’s like a nearly abandoned mall & unless something drastic changes they’ll go to zero so almost no one is buying and not many sellers, and the sellers who are there can set whatever price they want for it. Just illiquid that far OTM with barely any time left.
The MM’s (Market Makers) love to play a bait and switch game with the price and the bid/ask. I don’t know what YOUR level of understanding is with options so please don’t be offended if I start with the basics. No insult intended. The bid is what the MM’s will PAY YOU for something (stock/option) and the ASK is what they want YOU to pay THEM. If you have been trading for a while you may have noticed that sometimes the bid/ask looks really juicy and it entices you to put in a bid. Say you want to sell a put and you see a delta of maybe 10-15-20 and a bid ask that looks just too good to turn down for that trade. Example… – and “picking numbers out of the air” – the bid/ask is 25/75.. You think wow if I could get 50 for that it would be a gift so you try to sell a put contract for 50. INSTANTLY the bid/ask changes to 25/50… You think WHAT???… oh well let’s try 35 and INSTANTLY the bid/ask changes to 25/35 and you still don’t get a fill!!! The whole thing is a GAME to get some action going… that is all that is. Best of Luck. Twilighter.
Because people are free to ask whatever price they want.
For anything in the world really.
It doesn’t mean they will always find a buyer.
Liquidity is very low on this stock’s options, this is why stocks like MSFT, NVDA, AMZN or index funds like QQQ or SPY are so popular, there are far more buyers & sellers at various prices and expiries for those.
Options trading is a lot different then stocks, in stocks you can occasionally speculate on a riskier company, but in options those companies usually have low liquidity and bid/ask’s make it impossible to trade.
Though a company like HAL isn’t that risky, it’s just not a popular option vessel.