Valuations of options using price interrelationships

Discussion in 'Options' started by deltaf0rce, Dec 25, 2020.

  1. deltaf0rce


    I’m just starting to get a knack for options and would like to start a thread discussing the valuation of options by pricing them against other options.

    One area that I am learning a little more about is valuing options using combos.

    I don’t want to say much more and taint the discussion because I really understand this very little. Thanks.
  2. deltaf0rce


    For example: the 12/28 spx 3705 series combo is priced 2.45. Spot is 3703.06, parity would be 1.94. My reading of this is there being 51 cents of skew?
    .sigma likes this.
  3. newwurldmn


    no. That’s not skew. That’s bid offer and some borrow and divs
  4. deltaf0rce


    Re: bid/offer I am quoting the combo in the middle, I could see borrow but dividends ? On an index?
  5. newwurldmn


    if the bid or the offer is skewed it will skew your mid.
    Flynrider likes this.
  6. taowave


    Haven't traded SPX in a while,but the SPY options are definetly impacted by dividends ...

    Regardless,you don't look at the same month/strike for skew..

    For starters compare 25 Delta put to 25 Delta call...Normalize it if you want to impress your friends or pick up babes. :)

    deltaf0rce likes this.
  7. deltaf0rce


    19/Feb 25D have 9 % of skew am I reading that right?
  8. deltaf0rce


    Might someone try to leverage skew when trading a synthetic opposed to natural?
  9. .sigma


    Delta, it’s Christmas... take a break from optionality and spend some time drinking wine and relaxing. Just joking!

    you got the right idea with combos.

    you could also compare the 25 delta by let’s say the 50 delta?

    Also I’d take a look into comparing the implied vols of these strikes.

    can’t go into the weeds rn as I’m not home on my computer but I’ll get back to you later!
    deltaf0rce likes this.