I've seen something like that when working with IV surfaces. Got excited for a while, but latter I came to a conclusion that all options have the same market maker, who adjusts the bid/ask prices of all options in a chain. Isn't that the reason for "synchronisation" effect? Or I am missing the point completely?
Market makers do not determine IV surfaces. Skews are purely determined by supply and demand. Market makers just serve as "shock absorbers," providing liquidity. But their bids and offers rise in response to public buying, and drop in response to public selling. How could it be otherwise?
Maestro - seems like you've done research on this -- what do you think about underlying getting pinned to certain strikes at expiration?
Once in a while, ET have some good thread and this is one of it. MAESTRO? By chance, you have a math or engineering background?
You're being taken for a ride. You would have to assume the tail wags the dog, and it's not the case. Maestro is referring to contamination principles, poorly I might add.
That is essentially what I was trying to describe, with, I think, limited success. Dynamic Hedging has a clearer explanation, complete with diagrams.
Thanks for the wonderful insights Maestro. http://www2.warwick.ac.uk/newsandevents/pressreleases/swarming_starlings_help/ http://www2.warwick.ac.uk/fac/sci/physics/research/cfsa/people/wicksr/media/mibirdsposterfinal.pdf
When why would the options with no trading volume at all (I literally mean 0 volume) move synchronically with their (relatively) heavy traded brothers? How can you explain it otherwise than market maker in action?
Here's a different one. Put-call parity violations predict moves in the underlying . When the synthetic stock is more expensive than the cash stock, it is often b/c of informed traders buying the calls, and vice versa.