RE:Predicting closing prices on Option Expiration DaysYes, Obscure, you read that right. Max Pain Feb 18 is $USD 28, not far from where we are now, so a neutral bias.
March is a quarterly expiry, and at $USD19 as Max Pain.
https://maximum-pain.com/options Why the big difference you might ask?
It is largely due to when the date it goes on sale. If you look far enough ahead on the chains, you can only buy quarterly expiry option dates that far in advance. A bit closer, you can buy monthly and weekly expiry dates. Most of March was bought very early, as it was one of the few dates available, and the share prices were lower before the rally. Also as oil rose, bullish sentiment caused more calls to be bought than puts, then as more piled on, it got the skewed call heavy bias.
I bought March 19$ calls out of the money, when SU traded around $17 US, paying an average under $2, now selling around $10.
It is very hard to say where we will be in March, but there is definately a medium sized benefit for the underwriters to spend the millions needed to short it, and push it down somewhat if they choose. I have seen that disaster movie before.
To be safe, I'm watching it closely, and would likely part with my March calls this month in Feb on a rally to the last 52 wk high we made a few days ago, just under US$ 30.50 that it hit right before the earnings report. A 52 wk high is always a major resistance level, that may possiibly take longer to break through than the option time allows before the next leg up. That and the potential risk of an option counterparty March smackdown of a few bucks are good enough reasons to take profits on those options. Those folks holding longer dated ones would be a hold.
BTW, I loved the way it was trading today, right off the get go. Whoever was rushing for the exits on the US side and selling every slight gain on Friday seems to be done and gone. Trading was lockstep in unison. We even ended the day under volume on the US side, and normal on CDN side. Both sides ended green even after the late day selloff, with a nice 1% rise on the US shares due to our currency strength today.
Cheers
Obscure1 wrote: Migraine
Thanks for your input into the world of option trading. It has certainly opened up a new perspective on the ongoing tug-of-war of stock movements for me.
Your posts about the SU option information for February indicate to me that there is a good chance that SU will close on Friday Feb 18th at or very close to US$28.00. Am I reading this correctly?
Given the significant imbalance in the outstanding "in the money" call/put options for March, what would be your best guess for the US$ share price of SU on March 18?
I know it is too early to have confidence in picking a number, but when you study the option chain for March, I assume that a sophisticated option trader can get a feel for what is possible in terms of guiding the price towards a "doable" as opposed to a "maximum pain" strike price (in the absence of uncontrollable external events) that will minimize the pain for the option writers without calling in too many favours or waking the wolves.