Put Call not in parity

[misterkel]

Why are SPY options not in parity? At a month out, Calls are about 50c more than puts at same strike.
note: does not cross dividend payout.

 

[guru]

It would be nice if you provided specific screenshot or example, instead of asking everyone to start hunting for data and find examples that you didn't provide.

 

[minmike]

Usually a dividend.

 

[Robert Morse]

When I look at the implied vol of the puts and calls on the same strikes, I do not see any material difference.

 

[Saltynuts]

So, should there always be rough put/call parity? If not, is that a sign to go one way or the other? Thanks!

 

[jamesbp]

Why are SPY options not in parity? At a month out, Calls are about 50c more than puts at same strike.
note: does not cross dividend payout.

Put-Call Parity does not hold for American Style options with Dividends
https://www.elitetrader.com/et/threads/when-p-c-parity-does-not-hold.335059/

 

[misterkel]

Put-Call Parity does not hold for American Style options with Dividends
https://www.elitetrader.com/et/threads/when-p-c-parity-does-not-hold.335059/

Should only be adjusted across a dividend payout, but this is before the next ex-div.

 

[jamesbp]

Should only be adjusted across a dividend payout, but this is before the next ex-div.

?

 

[Robert Morse]

Yes, or there is an arb. Put-call parity assumes you will hedge. There are cases where your costs do not match what market makers use so there is a benefit to you to use the options if you are not hedging. E.g. In a very hard to borrow stock, calls appear lower than puts, because the hedge for buying calls and selling puts is shorting a HTB stock. In fact, the implied interest rate is a negative rate. If you use the negative rate, and hedge, there is put-call parity. There are times when I want to get long that I prefer the long call vs long stock or selling an ITM put instead of long stock as I'm not hedging and the put is higher. If I hedge, the cost built-in makes sense and there is put-call parity and no arb.

So, should there always be rough put/call parity?

 

[jamesbp]

Yes, or there is an arb. Put-call parity assumes you will hedge.

No it doesn't ... we have discussed before ... Put-Call Parity only holds for European Exercise Style Options ... and not American Exercise Style Options with Dividends such as SPY ...

From John Hull ( Options, Futures and Other Derivatives )