"Selling ITM strangles = Selling OTM strangles with the same strike price: Why?
- Thread starter OddTrader
- Start date
This statement doesn't parse...
The action of the market enforces equivalence.
If they were not equivalent, you could buy the cheap one and sell the expensive one, and get free money at no risk.
Should such a pricing discrepancy show up, it would quickly disappear as market participants would attempt to do just that, simultaneously bidding up the cheap one and pulling down the expensive one, until they were equivalent again.
Such discrepancies are called "arbitrage opportunities". They, like small black holes, free quarks, antimatter, etc, only exist for fractions of a second.
If they were not equivalent, you could buy the cheap one and sell the expensive one, and get free money at no risk.
Should such a pricing discrepancy show up, it would quickly disappear as market participants would attempt to do just that, simultaneously bidding up the cheap one and pulling down the expensive one, until they were equivalent again.
Such discrepancies are called "arbitrage opportunities". They, like small black holes, free quarks, antimatter, etc, only exist for fractions of a second.
Why not just go to an option chain and compare two real examples of ITM and OTM strangles with the same strike price and your answer of TRUE will be staring you in the face, especially when looking at a risk graph.