IV of DJX vs IV of it's 30 Component Stocks

Discussion in 'Options' started by Boulder, Jun 3, 2004.

  1. Boulder


    The IV of the ATM put for the DJX (102 djvsx) is 15.5%.
    The average IV of the ATM Puts of all 30 DJIA stocks is 22.9%.
    That makes sense.
    But when you add up the value of the 30 ATM Puts (1 contract for each stock) you get $2,850.
    The value of the DJX Puts (14 DJX contracts to get the same total position value $143,660 as 100 shares of each of the Dow components) I get $2,989...almost the same.
    I would think the sum of the individual 30 component puts would have a much greater value due to it's greater IV.
    Any Ideas?
  2. %%%%%%%%%%%%%%%%%%%%%%%%%%%%%

    As a practical matter , including thinking ,planning & commission executing;
    would rather do it with one index than 30 or 100 or 500 individual stock options.

    Same principal with BIG TRENDS mentioning the phone company having only 7 numbers for phone number.

    The plans of the diligent tend only to advantage.
    Solomon, trader KING.:cool:
  3. Boulder


    Turtle, thanks for your input.

    The real question I'm trying to solve is: Why isn't the sum of the individual Dow 30 stock puts much greater than the value of the DJX index puts for the same value of the underlying (approximate $143,000).

    The IV of the individual stocks is much greater: 22.9% vs 15.5% for the index's put IV. But the value of the puts is roughly the same ($2,900) for both.

    Thanks for any additional insight.
  4. damir00

    damir00 Guest

    there is 7 percentage points difference between the two IVs and 5% difference between the put costs - seems pretty close to me...?