What is more difficult? Predicting t or t+x ?

[earth_imperator]

Regarding the above said BSM sim discrepancy: I had used IV=11 but the market seems to have used IV=14.134 :

BSM simulations:

1) using IV=11
S=4221.0200 K=4280.00 IV=11.0000 S_Chg=67.9584 S_ChgPct=1.6100 (Sx=4288.9784) Calls:
  DTE=0.00  : C=8.9784  Prev=0.0646  Chg=8.9138  ChgPct=13800.93
  DTE=1.00  : C=14.9753 Prev=0.6265  Chg=14.3488 ChgPct=2290.16
  DTE=2.00  : C=18.8653 Prev=1.5838  Chg=17.2816 ChgPct=1091.15
  DTE=3.00  : C=21.9098 Prev=2.7177  Chg=19.1921 ChgPct=706.18
  DTE=4.00  : C=24.4968 Prev=3.9227  Chg=20.5742 ChgPct=524.49
  DTE=5.00  : C=26.7859 Prev=5.1493  Chg=21.6366 ChgPct=420.18
  DTE=6.00  : C=28.8609 Prev=6.3736  Chg=22.4874 ChgPct=352.82
  DTE=7.00  : C=30.7727 Prev=7.5835  Chg=23.1892 ChgPct=305.78
  DTE=8.00  : C=32.5546 Prev=8.7732  Chg=23.7815 ChgPct=271.07
  DTE=9.00  : C=34.2299 Prev=9.9397  Chg=24.2903 ChgPct=244.38
  DTE=10.00 : C=35.8158 Prev=11.0821 Chg=24.7337 ChgPct=223.19
  DTE=11.00 : C=37.3252 Prev=12.2003 Chg=25.1249 ChgPct=205.94
  DTE=12.00 : C=38.7681 Prev=13.2947 Chg=25.4734 ChgPct=191.60
  DTE=13.00 : C=40.1527 Prev=14.3662 Chg=25.7866 ChgPct=179.50
  DTE=14.00 : C=41.4856 Prev=15.4154 Chg=26.0702 ChgPct=169.12

2) using IV=14.134
S=4221.0200 K=4280.00 IV=14.1340 S_Chg=67.9584 S_ChgPct=1.6100 (Sx=4288.9784) Calls:
  DTE=0.00  : C=8.9784  Prev=0.3702  Chg=8.6082  ChgPct=2325.24
  DTE=1.00  : C=17.6384 Prev=1.9140  Chg=15.7243 ChgPct=821.52
  DTE=2.00  : C=22.7297 Prev=3.8653  Chg=18.8645 ChgPct=488.05
  DTE=3.00  : C=26.6835 Prev=5.8900  Chg=20.7936 ChgPct=353.03
  DTE=4.00  : C=30.0327 Prev=7.8889  Chg=22.1438 ChgPct=280.70
  DTE=5.00  : C=32.9911 Prev=9.8310  Chg=23.1601 ChgPct=235.58
  DTE=6.00  : C=35.6701 Prev=11.7078 Chg=23.9622 ChgPct=204.67
  DTE=7.00  : C=38.1364 Prev=13.5194 Chg=24.6170 ChgPct=182.09
  DTE=8.00  : C=40.4340 Prev=15.2687 Chg=25.1653 ChgPct=164.82
  DTE=9.00  : C=42.5932 Prev=16.9598 Chg=25.6334 ChgPct=151.14
  DTE=10.00 : C=44.6364 Prev=18.5970 Chg=26.0395 ChgPct=140.02
  DTE=11.00 : C=46.5806 Prev=20.1843 Chg=26.3963 ChgPct=130.78
  DTE=12.00 : C=48.4388 Prev=21.7255 Chg=26.7134 ChgPct=122.96
  DTE=13.00 : C=50.2216 Prev=23.2240 Chg=26.9976 ChgPct=116.25
  DTE=14.00 : C=51.9374 Prev=24.6830 Chg=27.2544 ChgPct=110.42

 

[M.W.]

Ok, in simple terms: the percent payout is higher because their probability to end up in the money was much lower. Do you get the same lottery odds when someone offered you a game to flip a fair coin?

You are justifying why the longer DTEs are more expensive.
But the topic was that shorter DTEs are though corectly cheaper, they give a much higher payout.
This much looks like a paradoxical situation, IMO.

 

[earth_imperator]

Ok, in simple terms: the percent payout is higher because their probability to end up in the money was much lower.

But IMO we agreed that predicting t is easier than predicting t+x.
So, then IMO your above statement contradicts this fact...

Do you get the same lottery odds when someone offered you a game to flip a fair coin?

Computer: Please reformulate the question

 

[M.W.]

There is no contradiction. An option with smaller odds to end up in the money trades relatively at a lower premium. A large move in the underlying then results in a larger percent change of premium, especially options with hardly any time value left. You may want to review some options basics.

But IMO we agreed that predicting t is easier than predicting t+x.
So, then IMO your above statement contradicts this fact...


Computer: Please reformulate the question

 

[earth_imperator]

New insights regarding the above analysis of the said last Friday where SPX had moved upto 1.61% or so wrt to previous day's close:

AsOf=2023-06-02-Fr-151524-EDT DTE=0.00 US=4288.9000 Chg=67.8800 ChgPct=1.6100 ChgPctMon=62.55 ATM_IV_Avg=9.61 Delta_z=3.12206 ...

ChgPctMon just means forward-transforming the 1.61% to monthly (it's not the real monthly change). A kind of "normalization" to make the ChgPct of different tickers comparable, but the Delta_z below is maybe better suited for this task.
ATM_IV_Avg is the avg ATM IV of both Calls and Puts of all ExpireDates of the inspected next 14 days (cf. DTE list in above link).
Delta_z is for the spot change in units of z (ie. that many StdDev's) wrt the previous close on the day before, ie. last Thursday.

I don't have the HV for the SPX, so I instead used the above said ATM_IV_Avg to get the Delta_z.
It means: that said past Friday was a "bigger than 3 sigma event" for SPX !
.

 

[M.W.]

Told you

New insights regarding the above analysis of the said last Friday where SPX had moved upto 1.61% or so wrt to previous day's close:

AsOf=2023-06-02-Fr-151524-EDT DTE=0.00 US=4288.9000 Chg=67.8800 ChgPct=1.6100 ChgPctMon=62.55 ATM_IV_Avg=9.61 delta_z=3.12206 ...

ChgPctMon just means forward-transforming the 1.61% to monthly (it's not the real monthly change).
ATM_IV_Avg is the avg ATM IV of all ExpireDates of the inspected next 14 days (cf. DTEs in list in prev posting).
delta_z is for the spot change in units of z (ie. that many StdDevs) wrt the previous close on the day before, ie. last Thursday.

I don't have the HV for the SPX, so I instead used the above said ATM_IV_Avg to get the delta_z.
It means: that said past Friday was a "bigger than 3 sigma event" for SPX !

.

 

[taowave]

Quickly read your opening post follow regarding predictability of T vs T +X. You followed it up with profitability of short dated long options vs long dated..

2 separate issues that really aren't related..

 

[earth_imperator]

Quickly read your opening post follow regarding predictability of T vs T +X. You followed it up with profitability of short dated long options vs long dated..

2 separate issues that really aren't related..

Thx, you are right, indeed separate issues.

 

[earth_imperator]

BTW, which other tickers with 0DTE options do exist currently?
I know of the above said SPX, plus NDX, SPY, QQQ, RUT.
Any others?

The following is of course true:

Technically, all optionable stocks have 0DTE options available at least once a month. However, the most commonly traded 0DTE options are on the SPX. Stocks that offer monthly options only have 0DTE options once a month, and stocks that offer weekly options as well have them once a week.

 

[HobbyTrading]

I can only predict for x < -t.