option priced too low?

[TD877]

New to options, but looking at the prices listed on yahoo for SPX options:
http://finance.yahoo.com/quote/SPY/options?p=SPY&date=1477008000&straddle=false

For example, take the 10/21 call contract with strike of 199.00. The premium for this is listed as 13.80.

199 + 13.80 = 212.80; however, the current SPX price is 213.12.

So does this mean that one buying this contract would make a profit even if the market never moved? That doesn't seem right, so I must be missing something. At first I thought maybe just dividends, but I can find this type of thing for put contracts too.

 

[Robert Morse]

Yahoo is not a reliable source of real time option prices. These will always line up or an automated trader will fill an order with any easy profit before you can see it.

 

[Martinghoul]

At the very least, don't look at the "Last Price" column. Instead, always look at current mid, i.e. the average of "Bid" and "Ask".

 

[JackRab]

I would also like to point out the obvious: SPY is not SPX... SPY is an ETF based on SPX, but that's not the same....

And like @Robert Morse and @Martinghoul say, don't look at Yahoo or the Last Price for accuracy.

 

[TD877]

I see. I know not to trust Yahoo for real time, but incorrectly thought over the weekend it would be accurate since trading stopped.

If I were to trade SPY options, how likely is it that I would find call contracts with:
strike price + premium = current price, such that I would break even (minus bid-ask spread) if the market didn't move?

Or do all the call contracts have some "house advantage" other than bid-ask spread that needs to be overcome just to break even?

 

[i960]

If I were to trade SPY options, how likely is it that I would find call contracts with:
strike price + premium = current price, such that I would break even (minus bid-ask spread) if the market didn't move?

Most likely close to impossible. All the algos have this space locked down atleast from an arb perspective.

 

[TD877]

Most likely close to impossible. All the algos have this space locked down atleast from an arb perspective.

That's an arb opportunity? I just wanted it so I'd be starting out neutral, as opposed to already in the hole and needing the price to climb just to break even

 

[i960]

That's an arb opportunity? I just wanted it so I'd be starting out neutral, as opposed to already in the hole and needing the price to climb just to break even

That in itself isn't an arb but it's not likely you'll find frictionless entries that often as otherwise there wouldn't be a vig for the market makers to collect.

The arb stuff I was referring to was really about your original question about the pricing descrepancy.

 

[JackRab]

That's an arb opportunity? I just wanted it so I'd be starting out neutral, as opposed to already in the hole and needing the price to climb just to break even

Well it is an arb, since you could sell the same strike put at anything over 0 and make a profit by selling the stock higher than what you paid for with the synthetic.