Does Option Prices tell current market bias?

[KerryNewman]

Opinions wanted, say a stock is priced at $300, an at the money put is $305 and an at the money call is $310, both same time frame say 7 days. Is the market saying, at this time the bias is bullish on this stock? Or does that not hold true?

 

[Error Correction Funder]

Prices don't, but IV might.

 

[spindr0]

I assume that you meant that the put is $3.05 and the call is $3.10 ?

I think that the carry cost would account for the 5 cent difference in price.

 

[312]

You might be looking at the wrong prices, such as last trade price instead of the right side of bid/ask to arb put/call parity. For options, bid/ask spread is more important than for stocks because it is usually a higher % of total price. Maybe the underlying announced a dividend increase. Either way, market makers don't take delta positions so IMO it's fugazi prices or funding/carry differences -- not a bullish indicator per se for the underlying.

 

[destriero]

When index skew is flat, but you need confirmation like a bull outside day with a stop under the low of the OD.

 

[KerryNewman]

I realize now I did not state the question properly. OK, lets say a stock is priced at $300. A $300 put cost $1.50 and a $300 call is $3.50, same expiration date. Does that mean the market is pricing the options as if the stock will rise?

 

[312]

What's the dividend and the forward rate?

 

[destriero]

When index skew is flat, but you need confirmation like a bull outside day with a stop under the low of the OD.

Disregard. Wrong thread.

 

[destriero]

Opinions wanted, say a stock is priced at $300, an at the money put is $305 and an at the money call is $310, both same time frame say 7 days. Is the market saying, at this time the bias is bullish on this stock? Or does that not hold true?

No, it’s put-call parity. Rates and dividends are embedded.

 

[312]

Likely they have a one-time dividend outstanding and your call is gonna get exercised before ex-div at a discount