I've never had an options market maker move the B/A on me,
but I have occasionally had my market or limit order execute
better than I expected. I think they make enough in those
massive spreads that they don't need to cheat me extra. ;)
Incidentally, I saw someone post somewhere that puts had become
much more expensive than calls. (Both struck at the market.)
This is something that is not possible. If you ever see it happen,
you can clock some dollars by selling the expensive option,
buying the cheap one, and heding with the underlying
security. In other words, if INTC is at $80, calls for Nov, 80
are at $6, and puts for Nov, 80 are at $3, then do the following:
Start with $83 in your account.
(1) Buy the Nov 80 puts for $3
(2) Buy INTC for $80.
(3) Sell the Nov 80 calls for $6 (covered calls)
You now have $6 in your account, plus the above securities.
If INTC rises, it will be called away and you will get $80, leaving
you with a total of $86. Total profit = $3.
If INTC falls, your loss on the stock will be exactly covered by
the expiration value of the put. The put/INTC combination will
end up worth $80. Plus the $6 cash in your account gives $86,
your total profit = $3.
In other words, you just arbitraged the time premiums for a $3
profit. If the puts are more expensive than the calls, reverse
the arbitrage by buying calls, selling INTC short, and selling
(covered) puts.
-- Carl |
