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SPY call/put spread
- Thread starter joeski
- Start date
Quote from joeski:
Does anyone know why the SPY calls have around $.70 more time premium than the puts right now? Ex-dividend was last week, so there must be something else.
Thanks!
Which strike(s) and which months?
PS.According to my analysis, and my volatility skew for ATM and OTM (131 and upper strikes) show higher volatility towards the front months and a bias towards the upside.
Looks like it's about .54 now. I don't know if it's changed or if I miscalculated earlier. It was right after EOD so I wouldn't expect it to adjust. In any case, .54 seems like a lot, too. Shouldn't the time premium be about the same for calls and puts of equal strike prices normally? I know that last month there was extra premium in the SPY calls (vs. the puts) because ex-dividend was before expiration day, which would require early assignees to deliver the dividend along with the shares. But next ex-dividend is 3 months away.
Let's not over-think this yet.
If the time premium is higher for calls, this would seem to indicate that speculators on the call side are more aggressive buyers than speculators on the put side.
Ok. Now let's over-think it.
Is there some big money out there calling a bottom, perhaps? (risky business given our "sluggish" economy, but with Goldilocks Kudlow and his puppy dog Dennis Kneale barking about how great the economy supposedly is, maybe some sharks are taking the bait?)
If the time premium is higher for calls, this would seem to indicate that speculators on the call side are more aggressive buyers than speculators on the put side.
Ok. Now let's over-think it.
Is there some big money out there calling a bottom, perhaps? (risky business given our "sluggish" economy, but with Goldilocks Kudlow and his puppy dog Dennis Kneale barking about how great the economy supposedly is, maybe some sharks are taking the bait?)
The time premium in the call and the put of the same strike and month is the same amount. Donât confuse time premium with a dividend being priced in or any other situation. If the time premium in the call of a particular strike was skewed over the time premium of the corresponding put that would set up an immediate arbitrage situation. Sell the call buy the put and buy stock and youâd lock in the extra time premium in the call you sold.
Big money or not the markets in options on the SPY are so deep and accurate you wont ever find a arb as simply priced as that.
So I agree.. âlets not over think thisâ but lets not under think it either.
Now if your question is not about the time premium Iâd have to look closer at the strikes. I can tell you without looking that the time premium in call and put is the same for the same strike and month.
Big money or not the markets in options on the SPY are so deep and accurate you wont ever find a arb as simply priced as that.
So I agree.. âlets not over think thisâ but lets not under think it either.
Now if your question is not about the time premium Iâd have to look closer at the strikes. I can tell you without looking that the time premium in call and put is the same for the same strike and month.
part of the problem is that my software was recalculating time premium using the after-hours quotes. That's why it fluctuated from .7 to .55 between my first two posts.
So I did a hand calculation with the last trades and the closing price, but still found a difference of about $.25, which is more than what I would expect for the reasons that xflat outlined.
Perhaps that final difference is just explained by last second fluctuations and will disappear when trading begins. Since the bulk of the discrepancy has been explained by my error, I'm not going to worry about it any more until tomorrow.
So I did a hand calculation with the last trades and the closing price, but still found a difference of about $.25, which is more than what I would expect for the reasons that xflat outlined.
Perhaps that final difference is just explained by last second fluctuations and will disappear when trading begins. Since the bulk of the discrepancy has been explained by my error, I'm not going to worry about it any more until tomorrow.