written by reader DOCU option price unchanged since 09/17/2020

By arunsam, October 14, 2020

Dear Irregulars,
I currently have the DOCU Jan 15 ’21 $75 Call options in my portfolio. I noticed that the options value has reamianed unchanged since 09/17 even though the underlying value of the stock value has moved quite a bit. Is there a technical reason for this? I have been scouring the internet and have learned about time value & intrinsic value. but it doesn’t quite explain what I’m seeing. I am new to options trading and I assume this is something I would see with other positions as well. I would appreciate any inputs you may have on this. Thank you for your time and consideration.

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Travis Johnson, Stock Gumshoe
October 14, 2020 2:32 pm

We tend to think of “price” as some entity in itself, but really it just represents where buyers and sellers could settle on a transaction for that particular asset.

In this case, the price hasn’t changed since mid-September because there have been no trades of that option contract since 9/17. There are bid and ask quotes in there, but there has been no actual trading. Like most options contracts it is very thinly traded in the best of times, the open interest is only 120 contracts or so, and because it is so deep “in the money” it will likely just follow along exactly with the stock, with no real premium added for the time value on the bid most of the time. You’ll almost certainly be able to sell to close your position at near the fair price (live DOCU price minus the strike price), but not likely much more, so the return from here will just follow DOCU more or less dollar for dollar, with a little leverage just because you have less capital at risk than you would if you actually owned 100 shares of the stock.

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