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Tom Armistead
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I am a retired accountant, having spent the early years of my career in the insurance industry and the later part in the field of accounting. My insurance experience has given me the willingness to accept investment risk if I feel the return justifies it; also, an interest in applying risk... More
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  • Painting the Tape 3 comments
    Dec 30, 2011 4:16 PM | about stocks: OLN

    The devil made me do it. As the market dragged its way to a weary end of a disappointing year, I noticed that my OLN Jan 2013 12.5 calls had a bid/ask of 5.20/9.40. With the shares trading at 19.70, the 12.5 call has to be worth 7.20.

    The problem was, my account, marked to market at the bid, was less than it should have been. 15 calls at 5.20 would be worth $7,800: at 7.20, they would be worth $10,800. I know the market maker wasn't going to beat me out of the $3,000, but I wanted it to show in my account.

    So I put in a bid for 1 contract at 7.20, which did not fill. However, it pumped my account up by $3,000. I don't plan to spend it all in one place.

    Stocks: OLN
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  • Rookie IRA Investor
    , contributor
    Comments (2885) | Send Message
    Brilliant, I must try the same thing. Sometimes my account dips thousands at the open, especially with lightly-traded LEAPs that may not have an up-to-date valuation.
    31 Dec 2011, 09:55 AM Reply Like
  • dancing diva
    , contributor
    Comments (2765) | Send Message
    Tom - I've done that often in the past because I get frustrated when I see the mm's affecting my daily performance with the ridiculously wide bid/ask quotes in illiquid options - and I figure I really want the option at the low level - but almost never have been filled. But let's face it, other than the short term satisfaction there's really no benefit in it.
    2 Jan 2012, 12:29 PM Reply Like
  • Tom Armistead
    , contributor
    Comments (6294) | Send Message
    Author’s reply » Rookie and dd,


    Thanks for your comments. I thought I was the only one who would let the bid/ask on deep in the money LEAPS get to me.


    I took it up with my broker, who cited volatility. Then I checked with the people who make the rules for the market makers, I forget now who does it, but what I found is that they only have to make a genuine market for like 20% of the time, across their whole book.


    There is always one day when they will get it right, that would be on the expiration.
    2 Jan 2012, 07:32 PM Reply Like
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