If I understand you correctly, your statement is not correct. Vol is maintained the same at a given strike and for a givene expiration because of call-put parity. Under usual conditions, the difference is due to cost of carry. PS: Pls. do not reference people that I, and probably others here, consider lower in expertise than many folks here.
There is some skew effect, and there is certainly some carry, but the largest effect in slightly different pricing for puts and calls could be the dividend.
I only trade index options so I can only speak from my experience and that is usually puts have a higher IV than calls and this is due to the greater fear of crashing than rallying. So people are willing to pay more for downside protection than upside potential I dont know what your knowledge level is on options so I just referenced a site that I use. I like their use of pretty pictures
DD are not really for index products because the horizontal skew is not in your favor (your selling something cheap and buying something expensive). Check the Imp. volatilities of the DD strikes. both strategies will give you a higher return when IV rise but a Calendar is better to manage because when the market falls like a nife a DD is difficult to manage (the IV goes up big time in the short strike vs. the bought strike). But when the "huge" drop happens 10 days for expiration you'll make $$$$. In short, managing something is more important than simply putting them on.
Quote from thinkplus: DD are little more delta and vega neutral and have higher theta than DC. it depends on your outlook of IV to say if it is good or not. If you expect Iv to go up, DC are better and vice versa. -------------------------------------------------------------------------------- I wish you gave an explanation rather than an opinion. Anyway, here is an explanation / example / reasoning behind the statement. I have taken the data from Russell 2000 (RUT) options closing prices today. RUT @753.37 15-Aug-08 DD -- Sell Sep 770 C, -40 Delta, 30 Theta, -90 Vega Buy Oct 780 C, 39 Delta, -23 Theta, 120 Vega Sell Sep 740 P, 38 Delta, 29 Theta, -89 Vega Buy Oct 730 P, -35 Delta, -22 Theta, 116 Vega Total: 2 Delta, 14 Theta, 57 Vega ================================================= DC (strikes 25 pts. from the underlying) -- Sell Sep 780 C, -33 Delta, 28 Theta, -84 Vega Buy Oct 780 C, 39 Delta, -23 Theta, 120 Vega Sell Sep 730 P, 32 Delta, 28 Theta, -83 Vega Buy Oct 730 P, -35 Delta, -22 Theta, 116 Vega Total: 3 Delta, 11 Theta, 69 Vega ================================================= DC (strikes 15 pts. from the underlying) -- Sell Sep 770 C, -40 Delta, 30 Theta, -90 Vega Buy Oct 770 C, 44 Delta, -24 Theta, 124 Vega Sell Sep 740 P, 38 Delta, 29 Theta, -89 Vega Buy Oct 740 P, -40 Delta, -23 Theta, 121 Vega Total: 3 Delta, 12 Theta, 66 Vega ================================ As you can see the DD delta and vega are less and theta is higher than DC. (note: I have rounded the decimals).
Trading a portfolio of Theta games the DD and (Double) Calendar have a positive Vega, you make more money when the Vols go up. ATM Butterflies and Iron Condors have a negative Vega, you make more money when the Vols go down. DD and Iron Condor are more based on Probability, you expect the vehical to move between a range (the short strikes). Calendars and ATM Butterflies are more a Theta game. So when trading these kind of strategies you should also have an opinion about the volatility (besides price) so you can diversify your vega risk.
While it is good to comapre, I did not talk about IC or BFly as this thread is not talking about various strategies. In fact, all the strategies you mentioned (DD, DC, IC, and BFly) are all range bound. The difference is some are good for wider range (e.g IC), and some are good for narrower range with related probabilities. There are various risk/reward/prob scenarios. The point was to compare DD vs. DC. Let's stay focused, you may want to start a new thread to compare other strategies .