I have been trading options for years, but I have never seen this.
As we all know, if an option contract expires OTM, it's worthless, and unsurprisingly, pretty much every chart of an option's price over time I've seen shows it gradually descending to 0.01 at 4pm ET on expiration day if it's OTM.
However, I just noticed that $QQQ options don't seem to follow this law. They seem to expire OTM at prices far above $0.01. The price action is as if the expiration date is wrong and as if they will actually get 1 more day.
For example: the trading day of May 22, 2024 is now over, and $QQQ never got anywhere near $560. However, May 22 $560 CALL options never approached zero — quite the opposite! They seemed to close at ~$0.50 and surged even further after hours.
I've never seen anything like this and I'm so confused. Can anyone explain this?
(Side note: Why can't I attach images here?)
Posted by jdunk__
4 Comments
What you described as normal is how it normally works. What happened is that Nvidia released earnings today at 4:20 PM, so traders were waiting on that price action until 4:15 PM when trading closed.
Options can be exercised until 5:30PM ET, so they still have some value after 4PM, as it is possible that after-hours movement in the underlying may make them worth exercising.
QQQ trades late like Spy? So 4:15 is expiry not 4:00.
IV my man. Volatility. there is always a small chance they can go ITM so unless they are more than 5$ OTM they wont always expire worthless at the closing time.