Does Option Prices tell current market bias?

Discussion in 'Options' started by KerryNewman, Apr 15, 2018.

  1. Opinions wanted, say a stock is priced at $300, an at the money put is $305 and an at the money call is $310, both same time frame say 7 days. Is the market saying, at this time the bias is bullish on this stock? Or does that not hold true?
     
  2. Prices don't, but IV might.
     
  3. spindr0

    spindr0

    I assume that you meant that the put is $3.05 and the call is $3.10 ?

    I think that the carry cost would account for the 5 cent difference in price.
     
    murray t turtle likes this.
  4. 312

    312

    You might be looking at the wrong prices, such as last trade price instead of the right side of bid/ask to arb put/call parity. For options, bid/ask spread is more important than for stocks because it is usually a higher % of total price. Maybe the underlying announced a dividend increase. Either way, market makers don't take delta positions so IMO it's fugazi prices or funding/carry differences -- not a bullish indicator per se for the underlying.
     
    murray t turtle likes this.
  5. destriero

    destriero

    When index skew is flat, but you need confirmation like a bull outside day with a stop under the low of the OD.
     
  6. I realize now I did not state the question properly. OK, lets say a stock is priced at $300. A $300 put cost $1.50 and a $300 call is $3.50, same expiration date. Does that mean the market is pricing the options as if the stock will rise?
     
    312 likes this.
  7. 312

    312

    What's the dividend and the forward rate?
     
  8. destriero

    destriero

    Disregard. Wrong thread.
     
  9. destriero

    destriero


    No, it’s put-call parity. Rates and dividends are embedded.
     
    Mugono likes this.
  10. 312

    312

    Likely they have a one-time dividend outstanding and your call is gonna get exercised before ex-div at a discount
     
    #10     Apr 15, 2018