Newcrest Mining (NCM) options strike prices

investedz · 21 January 2014

Hi all,

I'm not sure if it is only happening with NCM, but why are the option strike prices on the June options chain different from the usual pricing format?

Usually option strike prices are in $0.25 increments, and for some shares they are in $0.50 increments. Eg $8:00, $8.25, $8.50, $9.00, etc.

However for NCM, from June onwards the option strike prices change to: $8.70, $8.81, $8.95, $9.05, $9.20, $9.29

Has this always been the case with NCM? My concern is if I buy these options would the market for them disappear and change to the normal 25c increment strike prices after a few months? Would I for only be able to profit by exercising the options when they are in the money?

skyQuake · 21 January 2014

investedz said:
Hi all,

I'm not sure if it is only happening with NCM, but why are the option strike prices on the June options chain different from the usual pricing format?

Usually option strike prices are in $0.25 increments, and for some shares they are in $0.50 increments. Eg $8:00, $8.25, $8.50, $9.00, etc.

However for NCM, from June onwards the option strike prices change to: $8.70, $8.81, $8.95, $9.05, $9.20, $9.29

Has this always been the case with NCM? My concern is if I buy these options would the market for them disappear and change to the normal 25c increment strike prices after a few months? Would I for only be able to profit by exercising the options when they are in the money?

Stock goves ex div in march - strikes are adjusted accordingly

Sharkman · 21 January 2014

they won't disappear. i don't make a habit of trading NCM options - not something i'm terribly keen to punt on at this juncture - but i've seen RIO strikes at non-round levels on a regular basis and have often traded strikes of 59.93, 61.35 etc. 2 or 3 months out to expiry in the past - they don't disappear and suddenly revert to round number strikes.

i never figured out why the strikes sometimes go to non-round numbers. is it definitely due to the dividend? but RIO went to non-round strikes last dec - i sold 64.66 puts - and the RIO dividend was back in august. CBA is likely going ex-div next month but i've never seen CBA strikes do that sort of thing.

sails · 22 January 2014

Sharkman said:
they won't disappear. i don't make a habit of trading NCM options - not something i'm terribly keen to punt on at this juncture - but i've seen RIO strikes at non-round levels on a regular basis and have often traded strikes of 59.93, 61.35 etc. 2 or 3 months out to expiry in the past - they don't disappear and suddenly revert to round number strikes.

i never figured out why the strikes sometimes go to non-round numbers. is it definitely due to the dividend? but RIO went to non-round strikes last dec - i sold 64.66 puts - and the RIO dividend was back in august. CBA is likely going ex-div next month but i've never seen CBA strikes do that sort of thing.

It's been a while since trading stock options but I think the odd strikes are either due to a special dividend or a stock split. I had a quick look in the ASX ETO notices, but didn't find anything on NCM. Maybe I didn't go back far enough.

As an example, here's a link to an old notice on Suncorp advising of changes to strikes due to a special dividend:
https://www.asxonline.com/intradoc-cgi/groups/derivatives/documents/communications/asx_034491.pdf

This link might be useful too: http://www.asx.com.au/products/equity-options/eto-adjustments.htm

Sharkman · 22 January 2014

sails said:
It's been a while since trading stock options but I think the odd strikes are either due to a special dividend or a stock split. I had a quick look in the ASX ETO notices, but didn't find anything on NCM. Maybe I didn't go back far enough.

As an example, here's a link to an old notice on Suncorp advising of changes to strikes due to a special dividend:
https://www.asxonline.com/intradoc-cgi/groups/derivatives/documents/communications/asx_034491.pdf

This link might be useful too: http://www.asx.com.au/products/equity-options/eto-adjustments.htm

those are possible reasons i guess, but there must be other reasons. whilst i tend to stay away from NCM, i do trade RIO options on a regular basis, and they also go to irregular strikes on a regular basis too. what's more, those irregular strikes are at the same levels every time (59.93 is one i've traded on multiple occasions at different expiries, as it's near what i see as a key 59-60'ish level). and every time they do go to those irregular strikes, the contract size goes to 126.

the first time i saw it, i did a bit of googling but couldn't find an explanation anywhere. maybe the only way to get one would be to ask the exchange themselves?

sails · 23 January 2014

Sharkman said:
those are possible reasons i guess, but there must be other reasons. whilst i tend to stay away from NCM, i do trade RIO options on a regular basis, and they also go to irregular strikes on a regular basis too. what's more, those irregular strikes are at the same levels every time (59.93 is one i've traded on multiple occasions at different expiries, as it's near what i see as a key 59-60'ish level). and every time they do go to those irregular strikes, the contract size goes to 126.

the first time i saw it, i did a bit of googling but couldn't find an explanation anywhere. maybe the only way to get one would be to ask the exchange themselves?

Yes and it's easy to ask a question on the asx website. I have done so on a couple of occasions and found them extremely helpful in their replies.

Valued · 23 January 2014

If the strike prices are odd, make sure they are not European options. Sometimes you will have a strike price of say 10.01 and one of 10 so the 10 is normally American style and 10.01 European style. If it's European you cannot exercise it before it expires (but you may be able to trade it, but european style markets are illiquid often).

Sharkman · 24 January 2014

sails said:
Yes and it's easy to ask a question on the asx website. I have done so on a couple of occasions and found them extremely helpful in their replies.

i just sent an enquiry to the asx. curious to find out what the reason is, even if there's nothing we can do about it and just have to put up with the annoyance of holding say 2000 RIO and being unable to exactly covered call it during those odd months where the contract sizes go to 126. will post the answer here when i get one.

Sharkman · 27 January 2014

not very enlightening unfortunately, i did get a response but was just told it was due to corporate actions

i couldn't see any corporate actions on RIO for dec, and wasn't aware that it has the same corporate action every few months

ah well, guess it will have to remain a mystery for a while longer. nothing we can do about it anyway, those are the option chains being offered, we just have to trade it or leave it

cutz · 19 February 2014

Hi,

Often it's due to the stock receiving a special div or corporate action like in the case of fox, normal div has no implication to the strike and contract size, here is a NCM notice. https://www.asxonline.com/intradoc-cgi/groups/derivatives/documents/communications/asx_031288.pdf.

Newcrest Mining (NCM) options strike prices

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