Put/Call Premium Difference

arman555 said:
Hello Traders,

First of all, I know this question has been asked many times but I just need some clarification.

Almost all the answers here said that there is no put call parity (the difference between paying the premium to buy call and selling put at the SAME strike price, then shorting the underlying to create the reverse arbitrage). But I see it almost everywhere? Right now the FX pair USDJPY has had almost verticle climb over last two years and hence Put options are way more expensive than the call option. I am not new the trading spots and futures however I am new to the options. Am I missing anything? Right now the markets are closed but I have done over 100 backtest on thinkorswim exploiting this exact thing and making profit every single time. TOS also have this IV skew scanner, and the premium also takes into account the IV so why would there be not any premium difference?
Assets have directional bias all the time like USDJPY right now, EURUSD when it was crossing down 1.0000 level, even spy.
FYI, I have a way to avoid carry cost on almost every asset there is so I do not take it into account, is that where it balances out? I will post some screen shots here to show what I did can anyone please explain to me why would that not work in the real trading, please.

In the attachment I have done just one example and showed my steps.
View attachment 335781
View attachment 335782
View attachment 335783

I have also made sure to avoid the dividend date
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Interest rates.

Profit from trade = 6.18-4.51 = 1.67 ($167)
Cost to carry: $45,457 x 5.25% = $2,386 / 365 = $6.54 x 23 (days) = $150

***Not much more profit than leaving the money in the bank at 5.25%.
***If you can avoid the interest rates then take advantage. :-)
 
BKR88 said:
Interest rates.

Profit from trade = 6.18-4.51 = 1.67 ($167)
Cost to carry: $45,457 x 5.25% = $2,386 / 365 = $6.54 x 23 (days) = $150

***Not much more profit than leaving the money in the bank at 5.25%.
***If you can avoid the interest rates then take advantage. :)
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:D I Like IT!!
 
arman555 said:
No, but as i mentioned in the post, that is avoidable.
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No, it is part of the cost. In that old screen shot, there were 23 days to expiration. The riskless rate at the time was about 5.35% and the strike was 450. 450*(23/365)*5% = $1.42. This assumes no dividend. You can buy a T-bill or buy this spread for less than 448.58 net of all costs.
 
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"I am sorry but does future contract have carry cost or dividend cost?"

It absolutely does. The difference between spot and future includes net carry - assuming you can do the cash/carry trade.
 
ajacobson said:
"I am sorry but does future contract have carry cost or dividend cost?"

It absolutely does. The difference between spot and future includes net carry - assuming you can do the cash/carry trade.
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correct the "cost of carry" is built into the price of futures. But lets say that noone including me cant hold a position open for long. We can still do futures options and underlying future for far term and hold it for free (since future does not have any of those cost to carry.
 
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