Options Trading: Understanding Option Prices
I noticed that the value of some of our portfolios was changing after the market for the underlying stock had closed. Clearly, the value of the options was changing after the 4:00 EST close of trading.
I did a Google search to find a list of options that traded after hours, and came up pretty empty.
But now I have found the list, and will share it with you just in case you want to play for an extra 15 minutes after the close of trading each day.
List of Options Which Trade After Hours (Until 4:15)
Since option values are derived from the price of the underlying stock or ETP (Exchange Traded Product), once the underlying stops trading, there should be no reason for options to continue trading.
However, more and more underlyings are now being traded in after-hours, and for a very few, the options continue trading as well, at least until 4:15 EST.
Options for the following symbols trade an extra 15 minutes after the close of trading – DBA, DBB, DBC, DBO, DIA, EFA, EEM, GAZ, IWM, IWN, IWO, IWV, JJC, KBE, KRE, MDY, MLPN, MOO, NDX, OEF, OIL, QQQ, SLX, SPY, SVXY, UNG, UUP, UVXY, VIIX, VIXY, VXX, VXZ, XHB, XLB, XLE, XLF, XLI, XLK, XLP, XLU, XLV, XLY, XME, XRT.
Most of these symbols are (often erroneously) called ETFs (Exchange Traded Funds).
While many are ETFs, many are not – the popular volatility-related market-crash-protection vehicle – VXX is actually an ETN (Exchange Traded Note). A better way of referring to this list is to call them ETPs.
Caution should be used when trading in these options after 4:00.
From my experience, many market makers exit the floor exactly at 4:00 (volume is generally low after that time and not always worth hanging around). Consequently, the bid-ask ranges of options tend to expand considerably.
This means that you are less likely to be able to get decent prices when you trade after 4:00. Sometimes it might be necessary, however, if you feel you are more exposed to a gap opening the next day than you would like to be.
I would like to tell you about one of our portfolios that might interest you.
At the beginning of the year, we picked three underlyings that we felt would be at least the same at the end of 2015 as they were at the beginning.
They were SPY (S&P 500 tracking stock), AAPL, and GOOG. If we are right, and they are the same or any higher in price when the Jan-16 options expire (on January 15, 2016), we will make exactly 52% on our investment.
We made a single credit spread trade for each of these stocks, and if all goes well, the options will expire worthless and we won’t have to do another thing (except collect our 52% profit on that date).
At this point in time, all three underlyings are trading quite a bit higher than where they were when we started, so they could actually fall quite a ways from here and we will still collect those same gains. This is just one of 10 portfolios that we carry out for Terry’s Tips subscribers.
Each carries out a different strategy, and we update how each is doing every week in our Saturday Report. We welcome you to come on board and check them all out.
Tags: after hours trading, ETF, ETN, ETP, Terry's Tips, thinkorswim
This entry was posted on Friday, February 27th, 2015 at 2:02 am and is filed under Monthly Options, SPY, Stock Options Strategies, Terry's Tips Portfolios, Weekly Options.