Thanks again Ursa. Regarding "expected dividends", I have a pretty firm rule that I shy away from shorting dividend paying stocks. Reason is that if I am short the stock on the morning it goes ex-dividend I have to pay the dividend. That's not a lot of fun. In this regard, QQQQ is a killer. Without any advance announcement, it goes Ex-Div the Thursday prior to Expiration Friday on the quarterly months (Mar, Jun, Sep, and Dec). What's worse is DIA, which also goes Ex-Div without advance notice, but monthly instead of quarterly. Hence, one has to be completely nuts to short DIA, and only a little bit crazy to short QQQQ. Bob
I am sorry. I started one but nobody seems to care as most of the synthetics experts are having fun here. http://www.elitetrader.com/vb/showthread.php?s=&threadid=85504 4Q has consumed all the time of the option experts that they no longer have time to look at other threads. I am desperate to see the real world application of synthetics. If they are really equivalent, I should get a mathematical explanation for this case, right?
MTE, Thanks a lot. I realized that I would get the answer if I posted it here. In general, Is it true that ITM bid ask spread > ATM > CTM > OTM?
Yup! Generally, it's really just a function of the price - ITM are high priced hence the spread is high.