strange strange calendar (opinion poll)

[Baozi]

Ok so.. I found a situation where on the far ITM put side the short dated put(15DTE) is more expensive than a long dated one(150DTE). Same strike of course. IV is low on the short dated, and rock bottom on the long dated.

If I look at the graph on the analyzer looks like free money, but I learned not to trust too much these quant things when multiple expiration dates are involved.

For now I bought 1 lot just to feel the waters.. and I still have a very uneasy feeling about it.

ET people, what's your enlightened opinion? Please cast your vote (multiple choice allowed)..

 

[EvanDM]

Is this in a volatility symbol?

 

[Baozi]

Nope, it's on the 50ETF, China. (Or Chayna, if you prefer Trump-style.)

 

[EvanDM]

What’s the symbol?

 

[Doobs789]

No clue which underlying you’re referring to. But let’s say you’re right, why didn’t you sell the 15 DTE put, and buy the 150 DTE? This would result in a long calendar spread for a credit, which happens to violate the arbitrage bounds of BSM.

 

[jamesbp]

Not certain it violates BSM arbitrage
... you can buy DITM Put calendars for a credit where carry is positive ... interest > divi

The 'true' cost of the calendar can be determined by looking at the corresponding call calendar
... or dissecting out the 'time box'

Seems weird ... but all washes out on front month expiry

 

[Baozi]

@Doobs789

yep thats what I did for a 1lot.. seemed a bit too good to be true so I didnt jump in it full capital.. the symbol is 510050

 

[Doobs789]

@Doobs789

yep thats what I did for a 1lot.. seemed a bit too good to be true so I didnt jump in it full capital.. the symbol is 510050

Screenshot?

 

[Baozi]

Do you understand chinese?

 

[jamesbp]

Why don't you just give us

- ATM option prices / strike for the respective expiries
- Call / Put / strike prices for the calendar spread you are looking at
- Dividends / Interest by the respective expiries
- Excercise type