GM volatility skew!

December call IV's are in the 180's, put IV's are around 350.

 

They look pretty much inline to me.

Which line are you talking about?

 

The near the money ones.

With GM at $4.92, the $5 calls are .85x.88, $5 puts are $1.70x$1.76

 

Yeah, and the implied is 250% on both. Well at least that's what TOS is showing.

 

Hmm. Is TOS just slow or something? How can they show 250% on each. The calls are around 185% and puts at 350%, according to Optionsxpress.

It's not just DEC ones either - every month the 5 strike put IV's are well above the call prices. I guess a ton of fear is priced in.

JJacksET4

 

By the way, wouldn't it be easy to do a reversal on GM using those prices and make money?

Short 1000 shares = +4810
Sell (10) 5 strike puts = +$1800
Buy (10) 5 strike calls = -$840

Get $5770, but can only be worth $5000 against you at expiration.

Am I missing something here as I often see comments that Reverals cannot be done anymore for profit for small traders. The cost of carrying isn't too much for that profit for one month, and I don't think GM has a huge dividend (and would be surprised if they paid any out right now).

I can only assume I am missing something as this seems too easy.

Here is a site that explains Reverals:
http://www.theoptionsguide.com/reversal.aspx

JJacksET4

 

Try getting a short stock sale off

 

I hadn't known that GM and Ford along with some others were added to the short sale ban. From what I can tell, it seems like the stocks went down more after the ban.

I suppose there is no other way to simulate shorting the stock other then using options, which then negates the purpose in this case.

JJacksET4

 

Maybe it's Optionsxpress that is slow.

Anyhow, you can't short the stock so there is no arb.

 

Could you use CBOE GM single stock futures instead of NYSE?