Pricing Puzzler

misterkel

misterkel

The July options for SPY doesn't make sense to me.

242 - 243 strangle - 2.27

241-242 strangle - 2.43

Price of SPY - 241.8

Bought top strang yesterday - SPY at 242.5 - it lost money after a decent little move this morning. Why? It should be about 10% up, but it's lost about that.

Options have higher volatility for calls, fyi.
 
The "T" that sle mentioned is Trump. The puts are bid up right now because the market believes this is the beginning, not the end of today's story.
 
Theta for that strangle is about 20 cents? And probably some downward pressure on the implied vol as well... Vega is about 30 cents... so half a point drop in IV is another 15 cents...

You really think you would gain much on a move like that? You bought the 242-3 strangle... and it moves from outside to inside the strangle... You started out slightly short in delta en that move up means you're almost delta flat now...

So... all summed up.. you lost on Theta... you lost on Vega... and you lost on Delta...
 
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