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How Option Makers "Close The Door" On Afternoon Last Day Option Trading"

This is something which affects retail option traders which I have never really paid much attention to before. Option makers steer option traders away from chasing the option market between 1:00 p.m. to 3:00 p.m. on "last-day-Friday-afternoon-options". It's particularly noticable on certain stocks like Exxon. I came apon this after writing a blog about trading friday morning one day Call options on Exxon. Look at the "bid-and-ask" on this series of Calls on Exxon at 1:11.p.m. Look at how wide the spread is. Sixty one cents! That's crazy wide and if your stuck in a postion that you want to get out of at a fair price well good luck. Placing in a sell ticket by spliting the difference between the bid and ask would probably cause the bid to drop. This would force you to lower your asking price once again. In other words the liquidity is not there. This is in spite of it's mornings option trading being brisk. In all fairness there may be other reasons for t...
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Last Week I Said I Don't Like Purchasing One Week Options On Tuesday (Options with Only Three Day Trading Life Left)

Let's take four high priced stocks on a Tuesday at the close and track their "slightly-out-of-money", last few days to expiracy Calls. My take on things is that Tuesday options which expire on Friday are not the smartest of things to be buying. Let's follow their advancements into the next trading session. 1) Costco.
2) Deere
3) Eli Lilly
4) Tesla
Let's see what happened. First, here is how the D.J.I.A traded on the day.
1) Costco like the markets was flat on the day. The Calls lost 19% of their value.
2) Deere was down just a fraction. It's Calls were also down 19%.
So here is my thing. With short term (this week) options the option premiums drop about 20% a day in value in the first half of the week. It's an opportunity cost and unless you have a specific reason to be holding option contracts overnight I say just stay away. 3) Eli Lilly. Here is where things get interesting. The stock was up $2.09 and the options traded down! What's that all about? Well it's the 20% slippage in a day issue I keep mentioning.
4) Tesla. It took a jump of $5.26 to move the options up $.15 or not enough to make any profits after paying commissions. What a soboring thought.
Trade anyway you like. I don't like Tuesday's option action on short term options. Six month and one year out options are different thing. Buy and sell them on whatever day you like.

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