Wednesday, November 16, 2016

Kind of a screw job

I've noticed this on several trades.

Despite the stock going down .86% on the day, MRK put options for Dec 16 made a profit of 1 penny.  Aren't options supposed to have MORE action than the stock?  WTF?

PFE went down .36% by the time I'm writing this, and my puts actually LOST money for the day!  a 7.3% loss on the puts. 

Meanwhile, KO dropped much less than MRK, and I had calls, and they got killed. 


  1. Options pricing has an intrinsic component (the strike price relative to the underlying price) and an extrinsic component (time value).

    The extrinsic value of an option goes down with the passage of time (theta decay) and/or a decrease in implied volatility.

    So if you have a put option and the underlying goes down a little, you can have a decrease in the value of the option if the implied volatility decreases.

    1. One day can't cancel out almost an entire percent movement in the underlying. I think what happened is that volatility shrunk and a lot of option price is in the volatility