SPX Combo Prices

M

Marcas

Active member
Can somebody can explain to me how prices on those SPX combos are derived?



Data for when the picture was taken:
SPX @ 1934.83
DIV ~1.48% ($28.6)
dtes are marked on the pic.
Strike 1930 is 4.83 ITM.
Interest is minimal, like .01.
IVs (by TD):
@ 5 dte ~12%
@ 14 ~13+%
@ 98 ~ 20%

Why 5dte is so pricey?
 

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Marcas said:
Can somebody can explain to me how prices on those SPX combos are derived?

Why 5dte is so pricey?
Click to expand...

marcas, i modeled all three and it looks to me like the 5 dte put is underpriced. the put iv seems low
to me, relative to the calls. now, why would it be underpriced? i suspect it's a combination of
after-hours pricing and the fact that the markets are closed on monday, due to the holiday. i would
bet that it will get resolved on the tuesday open.


1613241158046.png
 
Thanks for looking into it.
1. I don't think it is a matter of misspricing.
Put and call prices in the chains look pretty much OK. Also a glance at how combo prices changes with dte, do not rise misspricing alert.
2. I don't know the model you are using.
Seems that there are some limitations in it because you have different put and call IV - where in 'reality', means with decent model, they should be close to the same. That doesn't mean your model is "wrong", I also use very much imperfect model, just I know what to expect of mine and what not to. I do not know yours.

My thought is that the cause of decreasing prices with dte are due to dividends, or rather high ratio div/interest where dividends are pushing prices up and interest rate does not push them up, but why there is that "overhead" in short dtes in the first place? It is not probability skew (I think) because, if so, combo prices would increase with time. But maybe, again, there is that play - int, div, probability - in action. I'm not convinced. Wonder if anybody already took closer looked at that.

Likely it is something simple I've overlooked.
 
i'm using just a black-scholes model and yes, it has flaws. all else being equal, dividends increase
put prices and decrease call prices, so a dividend effect should make the puts more expensive.
i looked at similar pricing on the /es option combos and didn't see a similar anomaly. i don't know if there's
any relevance here, but i believe the es options trade monday (and sunday) on globex.
 
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