JEFFRY TURNMIRE
Unveiling Hidden Market Anomalies for Fun and More
Have you ever looked at an options chain? I mean, really looked at it.
Most traders can say they’ve seen an options chain, but it’s usually a quick glance to find the option they want to buy. If you ever get a chance, take a moment to explore an options chain.
Because I’m about to share a valuable tip that could help you spot anomalies and potentially make more informed trading decisions.
As you scroll through an options chain, pay close attention to the “Last” price and compare it to the strike price.
For instance, imagine you’re looking at a GOOG options chain. Start on the call side with the at-the-money calls and examine the premium they’re charging.
Then, move up one strike price, which should be $1 less, and observe its premium. At expiration, you’d expect the premiums on strike prices that are $1 apart to also be $1 apart.
However, before expiration, these prices can fluctuate significantly. As an options buyer, often, as you venture deeper into the money, you’ll find better deals. This is because while the strike prices decrease by $1, the premium you have to pay increases by less than $1.
But here’s the kicker: sometimes you’ll spot an option that is priced unusually.
To detect these anomalies, start at the money. Let’s say the “Last Price” on the at-the-money option is $4.35.
Begin counting up the chain and add a dollar for each line you go up. For example, the line above the at-the-money should be $5.35, but it’s currently listed at $4.90.
The line above that should be $6.35, but it’s currently at $5.60, and so on.
As you can see, as strike prices decrease by $1, the premium is increasing by less than $1 in most cases.
If you count up several lines, you’ll often reach a point where the “Last Price” stands out as significantly different from the others.
For instance, on Sunday night I was looking at the Oct 27 117 Call and found that it is priced at $24.61 while the options around it suggest it should be closer to $23.
So, what can you do with this newfound knowledge? Well, depends on what you’re in the market for:
|
| • |
|
If you’re a buyer, you might want to steer clear of that option at the moment, as it’s priced a bit expensive compared to the options around it. |
|
| • |
|
If you’re a seller, you could capitalize on the anomaly by selling that option and potentially pocketing extra premium. |
As you can see, it can be relatively simple to spot some anomalies in an options chain.
And you can use those anomalies to make more informed trading decisions.
In fact, for more than a year, I’ve been using a different unique anomaly that I discovered in a pricing algorithm…
It’s given me a flawless track record of 64 wins and zero losses.
I know that’s hard to believe, so let me repeat:
For more than a year, my followers and I have maintained a flawless 100% winning stream using one weird market anomaly that I discovered.
If you’re curious to hear more about this anomaly, I want to invite you to join me in a live session this Thursday, October 26th, at 2 pm Eastern.
I’ll share everything you need to know about this weird anomaly, including plenty of trade walkthroughs and revealing why it happens again and again.
Reserve your spot by clicking here, and let’s explore this anomaly together.
Hope to see you there,
— Jeffry Turnmire |
