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Strategies & Market Trends : Options for Newbies -(Help Me Obi-Wan-Kenobe) -- Ignore unavailable to you. Want to Upgrade?

To: Madpinto who wrote (1496)7/8/1999 9:56:00 AM
From: Jon Tara  Read Replies (1) | Respond to of 2241
 
I beg to differ. Options quite commonly trade below parity near expiration. I suppose less so now that more people have cheap commissions.

The reason is your cost to exercise - commissions plus the cost of money. Near expiration, this can justify a discount to parity. (The specialist has lower costs than you do.)



To: Madpinto who wrote (1496)7/8/1999 10:01:00 AM
From: Mark Z  Read Replies (3) | Respond to of 2241
 
To second Jon's point, this is particularly true if your option is now deep in the money. For example, I have some QKLGG's, ELNK July 35's, which are bid at the moment at 31. ELNK is bid at 66 3/8. For 10 contracts, that's $375. Makes more sense (if I wanted to cash in now) to exercise and sell the stock than it does to just sell the options.


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