Although DIA appears to be consolidating early December’s steep rise, we took a speculative short position on Friday with the purchase of a dozen Feb 10 190 puts for 0.44, the highest price reported by a subscriber in the chat room. They sank fast toward day’s end for a few reasons: 1) Friday time-decay is always tough on weekly options; 2) DIA was wafting higher in the last hour — from 197.70, where we started buying the puts, to 1.96; 3) we’d given the market makers a bid to hit. Under the circumstances, a Black-Scholes model would have predicted the puts would fall to around 39 cents;, but with the ‘Friday factor’ at work, they were reflected at 0.30 bid/0.34 asked at the bell. As long as the market makers are going to pretend these puts are nearly worthless, I’ll suggest putting in a stink bid @ 0.25 for another dozen of them, day order. _______ UPDATE (Jan 23, 8:20 p.m.) On the opening rotation, DaBoyz stole puts that were dumped at-the-market for 0.27, shutting out our slightly lower bid. We’ll sit on the ones we’ve got for now.
