Hello, I'm looking at a slightly out of the money sell-to-open covered call for a few weeks from now. It has this: 0 bid, $0.65 ask, 1000 open interests. How can there be a 0 bid price with 1000 open interests? I'm thinking if you put in a bid for $0.20 it might get the call option out of hibernation or something. I can't quite figure out what a $0.00 bid price means. Thank you.
Sounds like a liquidity issue....maybe a recent big move? (QCOM?) That's usually a sign to stay away unless you know very specifically what you're doing. Might I suggest trying greener pastures than long options for trading? It's a very frustrating way to cut your teeth as a trader. You'll lose very frequently, but get enough big winners to keep you coming back to the table--but it's a losing game unless you're very good with direction (as in right better than 60% of the time--and that just sets you back to 0).
Hello, Thank you for your reply. I'm new at options. I think the number of open interests is a sign of liquidity? 1000 open interests seems like a good amount of liquidity, but I could be misunderstanding something.
That's usually true, but not always. What's the symbol, and what's the contract? If that was one big order, it's not necessarily the case. Large spreads and .00 bids are a good sign of lack of liquidity. It'd be easier to provide you with some direction in your thinking if we're looking at a solid example of what you're seeing too.
Time to expiry and distance OTM. If the option is expiring soon say < 1 week the 0 bid options will be closer to ATM. This isn't really liquidity but simply option value decreasing as expiry nears. Option prices are frequently in 0.05 increments so in those cases you might see 0.05 ask, 0.00 bid.
If you really want to sell it - test the market. Enter a limit sell at .50 and see if a bid is shown. Then walk it down to - what in your view is an acceptable limit. Liquidity was will poor, but I assume as a buy/write you are going to carry it into expiration. Is this a US option. If so how many venues does it list on. Let's see if you can wake one up.
Hardly likely. Almost any option near the money has some value, if only pennies. Plenty of options with almost no trading in them, so the mm's aren't going to post size. If the option is worth 30C fair value, then you can probably sell it for .25
OP doesn't say anything about what option it is, he doesn't say how far OTM it is... so it can be 30% out where obviously anyone would sell for 0.65 but nobody buy for even 0.01... If a quote is 0@0.60 it doesn't mean fair value is at the midpoint... could be anything really... anything from 0 to 0.60
SMB, you need to be more specific with your questions. Provide details of the stock, the expiration, the strike price. Otherwise you start these meandering threads that go nowhere.