Thoughts on ITM calender calls

[acen1975]

Quote from atticus:

ES or SPX Sep 18th 1000 put and call calendar, traded at mid today and priced at expiration. They will gain or lose within 20 cents of each other (microstructure variance), marked to mid at inception and the close of LTD, or I lose the bet.

Take the wager?

first you are not telling me where are you longs.
and then the spread is not DOTM,but more ATM.you can not feel the diference from a IV spike,cause is too close to the underline.
put the spread DOTM-let say at 930 strike,and widen the months-september against december......
and if there is a spike in IV+ a move of 30-40 and they are still the same,you win....

 

[atticus]

Quote from acen1975:

bingo-they trade with the same IV,OK.
but as you know OTM time spread has 100% extrinsic,and ITM almost 100% intrinsic,right?
so the IV change doesnt reflect almost at all at the ITM spread,but does on OTM one.
OTM time spead is very sensative to a IV change,the ITM is not.
you said it-lets look you way-if the IV is the same,OTM spread-the short option is cheaper than the long-so the spread gains value-the long option becomes more expensive,than the short one,not just only from the bigger delta,that apriciates the spread,but olso from the spike in IV.
ITM spread apriciates the same way from the move-you got the same gain from the deltas,as the OTM one,cause they are syntetics,but the gain of the IV of the spread is SMALLER ,than this of the OTM one,because OTM options are more sensative to IV than ITM.
and even they are syntetics,the IV spike will be a plus for the OTM one.

So I assume you're not taking the wager?

Flow will impact the vol-line, but it's silly to think it's based upon moneyness. It's microstructure-related, and therefore the edge results in an arbitrage. Same-strike put and call calendars will trade at unequal premiums due to rates, but the return is the same. Why isn't a 10-wide roll/box at $10 with time to expiration? Use SPX or any Euro-convention option and price the path to expiration. Use any strike you wish. There is risk to rates, but that's not your point, nor mine, but it's embedded in my 20-cent cushion.

 

[spindr0]

Quote from atticus:

You're a wind-up. Good bye.

LOL. Nice edit

 

[atticus]

Quote from spindr0:

LOL. Nice edit

lol, fu! I am trying to be civil as he believes what he's stating here. The returns will be flat, regardless of smile. IOW, he's making an argument for a persistent arbitrage condition.

 

[spindr0]

Quote from atticus:

lol, fu! I am trying to be nice as he believes what he's stating here. The returns will be flat, regardless of smile. IOW, he's making an argument for a persistent arbitrage condition.

Hey, don't take it out on me! I've been the one PM-ing you all of the correct info to post

I gave up 3 pages ago. Kinda reminded me of my days of arguing with a monkey (pre hallucinogenic usage)

 

[acen1975]

Quote from atticus:

lol, fu! I am trying to be nice as he believes what he's stating here. The returns will be flat, regardless of smile. IOW, he's making an argument for a persistent arbitrage condition.

guys,i doubt that in this forum there are people,how doesnt know that this is a syntetic.
but is not a pure one,like a conversion or riversal arbitrage as buying covered call,instead of shorting put.
this is a semisyntetic and is IV sensative.
at first i told you-i dont argue that they are the same.
all the greeks would move in the same manner,but the IV would apriciate the vega differently.
the change in IV materializes as a different vegas on those spreads.
everything else would be the same.
i really dont understend why you keep telling me about put/call parity,as at first i told you that i know they are the same spreads.

 

[atticus]

Quote from acen1975:

guys,i doubt that in this forum there are people,how doesnt know that this is a syntetic.
but is not a pure one,like a conversion or riversal arbitrage as buying covered call,instead of shorting put.
this is a semisyntetic and is IV sensative.
at first i told you-i dont argue that they are the same.
all the greeks would move in the same manner,but the IV would apriciate the vega differently.
the change in IV materializes as a different vegas on those spreads.
everything else would be the same.
i really dont understend why you keep telling me about put/call parity,as at first i told you that i know they are the same spreads.

I am always open to learning something new. How can it persist outside of the roll-market?

 

[acen1975]

Quote from atticus:

I am always open to learning something new. How can it persist outside of the roll-market?

you just need a IV spike.even if the market doesnt move,but you have a spike,the OTM spread would cost more,depending of the spike.
semisyntetic are syntetics,which have change in just one of the greeks.
the same is the verticals-put or call vertical are the same ,right?
well,they are ,but no really 100%-there's relation between the the move of the underline vs theta-you buy the at the same prise,they -they are syntetic product.......but they will apriciate differently with time passes,depending of where the underline stays.
ATM option is being eaten faster,than OTM or ITM one.......
the same is with the time spreads,but they are IV sensative........
otherwise all this spreads are syntetics and at the time of the the buing or at exp. they are the same.
and because they have just one of the greeks moving slightly different ,but all the rest are the same,its hard to notice.

 

[atticus]

Quote from acen1975:

you just need a IV spike.even if the market doesnt move,but you have a spike,the OTM spread would cost more,depending of the spike.
semisyntetic are syntetics,which have change in just one of the greeks.
the same is the verticals-put or call vertical are the same ,right?
well,they are ,but no really 100%-there's relation between the the move of the underline vs theta-you buy the at the same prise,they -they are syntetic product.......but they will apriciate differently with time passes,depending of where the underline stays.
ATM option is being eaten faster,than OTM or ITM one.......
the same is with the time spreads,but they are IV sensative........
otherwise all this spreads are syntetics and at the time of the the buing or at exp. they are the same.
and because they have just one of the greeks moving slightly different ,but all the rest are the same,its hard to notice.

Ok, please define it mathematically; which moment?

 

[acen1975]

Quote from atticus:

Ok, please define it mathematically; which moment?

the moment with the vertical is if you buy it OTM ,than the underline hits one of the strikes of the spread.till that time they apriciate the same.but than if the underline stays several days at this strike,the spread which has the short option at this stike will start being a little more expensive than the other,because ATM options decay more than OTM.
and you'll have a syntetic vertical,but one would cost more of the other during that time frame