Question about options

Juice Newton

Newbie
2 0
Hi there,

I've been looking into trading lately and wanted to build a nice knowledge base before getting into it. I also want to join this forum to ask questions about things when I can't find the info by searching.

One question I have today is about options trading, which I am learning about lately. I've been looking over some options chains recently and I have found a few call options that are about to expire but are deep in the money. The thing is that the price of the contract is very low, to where the price of the contract plus the strike price is still below today's stock price. For instance, on one chart the contract price for a call option that expires at the end of the week is 1.57 and the strike price is 1.50 but the stock price today is 4.25. Couldn't one buy the contract for $157, exercise it for $150 and sell the stock the same day (or next) for $425, thereby gaining $118? It seems like a sure thing that people should jump on every time but I don't see it happening, so I must be missing something.

What am I missing here?

I appreciate any reply. Thanks.
 

ACstudio

Active member
138 14
Hi there,

I've been looking into trading lately and wanted to build a nice knowledge base before getting into it. I also want to join this forum to ask questions about things when I can't find the info by searching.

One question I have today is about options trading, which I am learning about lately. I've been looking over some options chains recently and I have found a few call options that are about to expire but are deep in the money. The thing is that the price of the contract is very low, to where the price of the contract plus the strike price is still below today's stock price. For instance, on one chart the contract price for a call option that expires at the end of the week is 1.57 and the strike price is 1.50 but the stock price today is 4.25. Couldn't one buy the contract for $157, exercise it for $150 and sell the stock the same day (or next) for $425, thereby gaining $118? It seems like a sure thing that people should jump on every time but I don't see it happening, so I must be missing something.

What am I missing here?

I appreciate any reply. Thanks.

Ye you're missing something. Include the ticker for quicker response so we don't have to take the time to write..."What's the ticker?" then wait for your answer. Maybe a special dividend or really wide bid/ask spread or something..
 
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Reactions: options-george

ACstudio

Active member
138 14
The prices look about right now. But ye you were correct to not think that there was any free money there.
 

Rhody Trader

Senior member
2,620 266
You need to make sure you look at the current bid/ask, not the last traded price. Many options, especially those well in or out of the money, do not trade very frequently, so the "last" price could be very old and not at all reflective of where you could actually do a trade.
 
 
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