GM volatility skew!

Quote from MTE:

Yeah, and the implied is 250% on both. Well at least that's what TOS is showing.
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Hmm. Is TOS just slow or something? How can they show 250% on each. The calls are around 185% and puts at 350%, according to Optionsxpress.

It's not just DEC ones either - every month the 5 strike put IV's are well above the call prices. I guess a ton of fear is priced in.

JJacksET4
 
By the way, wouldn't it be easy to do a reversal on GM using those prices and make money?

Short 1000 shares = +4810
Sell (10) 5 strike puts = +$1800
Buy (10) 5 strike calls = -$840

Get $5770, but can only be worth $5000 against you at expiration.

Am I missing something here as I often see comments that Reverals cannot be done anymore for profit for small traders. The cost of carrying isn't too much for that profit for one month, and I don't think GM has a huge dividend (and would be surprised if they paid any out right now).

I can only assume I am missing something as this seems too easy.

Here is a site that explains Reverals:
http://www.theoptionsguide.com/reversal.aspx

JJacksET4
 
Quote from xflat2186:

Try getting a short stock sale off
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I hadn't known that GM and Ford along with some others were added to the short sale ban. From what I can tell, it seems like the stocks went down more after the ban.

I suppose there is no other way to simulate shorting the stock other then using options, which then negates the purpose in this case.

JJacksET4
 
Quote from JJacksET4:

Hmm. Is TOS just slow or something? How can they show 250% on each. The calls are around 185% and puts at 350%, according to Optionsxpress.

It's not just DEC ones either - every month the 5 strike put IV's are well above the call prices. I guess a ton of fear is priced in.

JJacksET4
More...

Maybe it's Optionsxpress that is slow. :D

Anyhow, you can't short the stock so there is no arb.
 
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