newbie question-please help

[Burgasbodo]

I'm relatively new (and still learning about) options and am seeing something that has me perplexed.
If an April 11 $44 call is selling for $16.10, wouldnt that "create" the option at $60.10? and if so, with the current stock price at $83 would it not create an instant profit of $2290 ?

[bxoylqoa76]

I'm missing something? my calcs are wrong?
confused as to why peeps arent jumping at this call.
what am I missing?
seems to good to be true

[Caleblm]

It doesn't quite work like that as that profit would only be realized at expiration. When you buy the option, the change in the premium is what makes you money until expiration. If the stock price goes down, the price of the premium will go down and the call that you bought would be worth less. If the price of the option goes up, then your call is worth more and you will make a profit if you sell the call.

[Careprostsbodo]

That's pretty much it in a nutshell. One thing to consider though, there is a time decay to the premiums. As expiration nears, the premium will generally go down so most people (as I understand it) sell way before expiration.

[CarlosNap]

It seems to me like an imbalance of some sort. According to the way you stated it here your calculations should be correct. Buy it and when it finally rebalances, sell it or create some kind of spread.

If the other strike prices are in line you could create a spread right away and lock in the difference.

My guess is that the option ask probably is higher and that 16.10 was the "last transaction price" so look at the bid and ask prices because that's what you have to buy it at. If this is not the case buy it and pm me what it is so I can buy it too http://onlinetradersforum.com/styles/default/xenforo/clear.png