stock options?

Question

I have a Yahoo Portfolio with 2 stock otpions in it. BGOAA.X Call, and BGOMA.X Put, both are for BEMA GOLD company. In one day the Put went up 75.00% and the Call went Up 25.00%. I thought when you held options and one went up in price the opposit option goes down in price? Any input? Thanks

Answer 1

Till expiration these movements are unpredictable. It depends on what each buyer and writer think where the underlying metal price is heading. Like you have both bulls and bears in stock market you can have players betting on both direction of the same market. So the situation you encounter. I think from the numbers you have given the market for gold is bearish.

Answer 2

Options are illiquid so a put and call can easily, though strangely go the same direction if their are buyers willing to pay that price. This is because options, particuarly in a stock like bgo are so liquid, one person can make a whole lot of difference. Generally options are traded on limit prices to protect against illiquidity issues.

So, imagine if the price of Bema (BGO) is falling and the put price is naturally goes up. Then some guy or gal comes a long and wants to buy a call, since he believes it will reverse just the same. If their are no sellers at any given time, he may bid it up to get that call in his hands, luring someone into to make a premium. Or, someone may need the option to cover another position as insurance, say a short position. That may cause enough desperation to bid it up.

I trade gold and gold stocks often. We are in a quick gold correction. There is strong evidence that we're about to turn around, in my view and go up, at least for a couple of days. Today may be a taste of that. It is precisely at those pivot or inflection points when these types of things can happen.

Answer 3

If you are long both options ( meaning you bought both to open position) the movement in Bema to the upside to day has a positive effect on the the call. BGOaa jan5 call. The price movement you are seeing in the option is based on last trade for option, which may have taken place several trading days ago on put. It is not reflective of the price movement in Bema stock. Yahoo does a very poor job pricing options. So be very careful relying on the bid and ask numbers through yahoo finance. Options xpress or the CBOE website is much better. CBOE is the chicago Board options exchange and the largest of the six options exchanges.

Answer 4

I agree that probably it is a problem with whatever website you are using to determine the value of the options. Certain things like an increase in the volatility of BEMA stock would cause both put and call prices to rise simultaneously, but not as much in a single day as your options.

Answer 5

It is a relative price. You are still okay. It isn't unusual. It shows some sense of concensus. Essentially, the market is 3 to 1 in favor of it going down in that time period. Don't sweat it.