Comments on: Option Liquidity: When Is Vol(ume) Greater Than Open Interest? https://www.thebluecollarinvestor.com/option-liquidity-when-is-volume-greater-than-open-interest/ Learn how to invest by selling stock options. Sun, 31 May 2015 20:33:30 +0000 hourly 1 By: Yadao https://www.thebluecollarinvestor.com/option-liquidity-when-is-volume-greater-than-open-interest/#comment-23189 Sun, 31 May 2015 20:33:30 +0000 http://www.thebluecollarinvestor.com/?p=11370#comment-23189 Excellent information & well explained, Thanks.

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By: Alan Ellman https://www.thebluecollarinvestor.com/option-liquidity-when-is-volume-greater-than-open-interest/#comment-23173 Thu, 28 May 2015 13:38:51 +0000 http://www.thebluecollarinvestor.com/?p=11370#comment-23173 In reply to Joe.

Congratulations Joe. Waiting for the earnings report to pass generated the pop from a positive report plus the (unintended) pop from the merger news.

Dinner is on Joe everybody!

Alan

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By: Joe https://www.thebluecollarinvestor.com/option-liquidity-when-is-volume-greater-than-open-interest/#comment-23172 Thu, 28 May 2015 12:26:35 +0000 http://www.thebluecollarinvestor.com/?p=11370#comment-23172 In reply to Alan Ellman.

AVGO reported earnings this morning. After earnings, the price got an additional pop in additional to yesteterday’s increase on news of the merger with BRCM. I am holding the stock and have been waiting to sell the CC until after earnings. Now with the merger news I am unsure to skip the CC this month and wait until the dust settles.
Joe

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By: Alan Ellman https://www.thebluecollarinvestor.com/option-liquidity-when-is-volume-greater-than-open-interest/#comment-23171 Thu, 28 May 2015 11:25:27 +0000 http://www.thebluecollarinvestor.com/?p=11370#comment-23171 BRCM/AVGO merger:

http://www.marketwatch.com/story/broadcom-agrees-to-be-acquired-by-avago-tech-in-a-37-billion-deal-2015-05-28?siteid=bnbh

Merger to take place in the 1st quarter, 2016

Alan

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By: Alan Ellman https://www.thebluecollarinvestor.com/option-liquidity-when-is-volume-greater-than-open-interest/#comment-23169 Thu, 28 May 2015 09:48:32 +0000 http://www.thebluecollarinvestor.com/?p=11370#comment-23169 In reply to Patricia.

Patricia,

Your shares are currently worth $45.50, your option obligation. If you close the short option position based on market close stats, your shares will be worth $57.16, an increase of $11.66 The current bid-ask spread for the June $45.50 monthly is $10.45 – $12.40 with the last trade at $11,.43. Let’s say you can “negotiate” a close price of $11.80. That means the cost to close is $0.14 per share plus commissions. At that point you can take no action and hope to gain from a potential merger announcement which may take place as early as today (risky) or sell the stock to use the cash to enter a new covered call position with a new stock (mid-contract unwind exit strategy). If you do not want to buy back the option, it is in the hands of the option buyer which isn’t so bad because it appears that you maxed the trade you initially executed. Early assignment is possible but not a negative. You can then put that newly-acquired cash to work.

Needless to say, this remains a volatile situation.

Alan

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By: Patricia https://www.thebluecollarinvestor.com/option-liquidity-when-is-volume-greater-than-open-interest/#comment-23166 Wed, 27 May 2015 23:50:10 +0000 http://www.thebluecollarinvestor.com/?p=11370#comment-23166 In reply to Alan Ellman.

Alan I have some BRCM stock which I had sold som ATM covered calls. Wish I had bought some extra shares and left noncovered! Oh well! Anyway wondering if you could expand on the Mid-contract unwind for this stock. I am wondering if it is likely that I will be exercised out early on this stock. I don’t want to pay up to buy out the option. So I assume if I am not exercised out early, then I should make sure my buy to close should only be done if the time value is near zero. Last I heard the price on the proposed deal was still up in the air so the June $45.50 call I have still had a large spread. Maybe I just need to wait a day or two and see what shakes out.

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By: Alan Ellman https://www.thebluecollarinvestor.com/option-liquidity-when-is-volume-greater-than-open-interest/#comment-23165 Wed, 27 May 2015 21:44:47 +0000 http://www.thebluecollarinvestor.com/?p=11370#comment-23165 Premium members:

This week’s 6-page report of top-performing ETFs and analysis of ALL Select Sector Components has been uploaded to your premium site. The report also lists Top-performing ETFs with Weekly options.

For your convenience, here is the link to login to the premium site:

http://www.thebluecollarinvestor.com/member/login.php

NOT A PREMIUM MEMBER? Check out this link:

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Alan and the BCI team

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