Reading the Tea Leaves.

Arnie Guitar

Arnie Guitar

How many of you take the time to look at options that are the same distance away from the underlying, and what do you think about it. I've been taking positions on the S&P 500 lately, and I find it interesting to notice the difference between options that are say, 40 points below and 40 above. This morning the calls had bigger premiums than the puts, and this was before the move down. I haven't compared them within the last hour or so, the calls had fatter premiums....then down we went.

Maybe the calls have bigger premiums because of Abby Cohen's call for...what was it, 1700 on the S&P next year? She has a lot of credibility..., alot of other's are calling for a big up year next year also.

Anyways, what do you think of when you see a disparity in premiums between options that are the same distance away from the underlying?
 
Quote from Arnie Guitar:

This morning the calls had bigger premiums than the puts, and this was before the move down.
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This would be a shocking development, if true..


This morning, at 11:30, S&P cash had a high of 1425. So, looking at options 35 higher and 35 lower at the same time:

Jan 1460 Call: 1.90
Jan 1390 Put: 4.80

Where you looking at a different month? Different contract? Puts, these days, are always more expensive than the calls on the S&P.
 
If you just look at the 'Last Traded Price' on the option that can be a little misleading too---depending on volume and when that last trade took place.
 
Quote from Arnie Guitar:

How many of you take the time to look at options that are the same distance away from the underlying, and what do you think about it. I've been taking positions on the S&P 500 lately, and I find it interesting to notice the difference between options that are say, 40 points below and 40 above. This morning the calls had bigger premiums than the puts, and this was before the move down. I haven't compared them within the last hour or so, the calls had fatter premiums....then down we went.

Maybe the calls have bigger premiums because of Abby Cohen's call for...what was it, 1700 on the S&P next year? She has a lot of credibility..., alot of other's are calling for a big up year next year also.

Anyways, what do you think of when you see a disparity in premiums between options that are the same distance away from the underlying?
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Arnie I actually was watching CNBC when Abbie was asked and she said 1550! not 1700. (This was a couple of weeks ago when we were toppy) Whether or not she changed it I don't know but while she thought 2007 would be OK I got the impression she was NOT that bullish.
 
Quote from RichardRimes:

Arnie I actually was watching CNBC when Abbie was asked and she said 1550! not 1700. (This was a couple of weeks ago when we were toppy) Whether or not she changed it I don't know but while she thought 2007 would be OK I got the impression she was NOT that bullish.
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You know, I think you're right about that...oops...:(
 
Quote from Arnie Guitar:

How many of you take the time to look at options that are the same distance away from the underlying, and what do you think about it.
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Arnie,

Remember you need to look at the underlying forward price, not the cash. There could be a significant difference in value, depending how far out in time you go.

That may go some way to explaining the Calls/Puts pricing discrepancy ?
 
S&P roughly at 1450.

Mar 1400 Put @ 2.80.

Mar 1500 Call @ 1.10.

Both options roughly 50 points out of the money, one more than twice the price of the other.

If I had half a brain, I'd know what that meant. I know what I think it means...
 
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