is it? why dont you model it,but put different volatility into the model..... even at expiration there might be a difference-at exp. the short ones are at 0 vol-doesnt play any role.......but the longs? you have one OTM put and ITM call..... with a rise in IV ITM call will be the same prise......but OTM put will gain..... wanna bet?
you are taking me for a spin? you kiding? and i would suggest you read up on vertical and vorizontal IV skews.. and what, let say ,a volatility smile might do to these spreads and then we will continue about the put call parity. a begginer would say that these spreads are different. a experiance trader would say they are the same a veteran would agree and disagree with both the beginer and the expirienced one........ that the world of options..thats why i love it. in your case you are right az much as you are wrong
Are you a poor factory worker who successfully took ET's overnight ESOL crash course? Your broken English and staccato grammar have improved unbelieveably! If I didn't know better, I'd bet that we were discussing risk free trading! And FWIW, the numbers that you tossed out gave nearly identical results (one calendar gained a penny more than the other). Nice try tho... Have you considered ET's smoke and mirrors course?
Both the front and back month calls and puts are at the same strike, so they are tied together by put-call parity. Hence the front month call and put will trade at the same IV, and the back month call and put will trade at the same IV. A volatility smile is completely irrelevant here.
i play this all the time.because when the oil fall,it is usually supported with widening the contango between the futures,i order from the pits the local to produse me DITM calls,instead of OTM puts,because electonicly you cannot buy them-no liquidity so deep. so i kind of had some expierience with the time spreads....... i perfectly know that MM is "producing" them by selling OTM put spread.....at the moment is the same.....but no really later,believe me.....
ES or SPX Sep 18th 1000 put and call calendar, traded at mid today and priced at expiration. They will gain or lose within 20 cents of each other (microstructure variance), marked to mid at inception and the close of LTD, or I lose the bet. Take the wager?
bingo-they trade with the same IV,OK. but as you know OTM time spread has 100% extrinsic,and ITM almost 100% intrinsic,right? so the IV change doesnt reflect almost at all at the ITM spread,but does on OTM one. OTM time spead is very sensative to a IV change,the ITM is not. you said it-lets look you way-if the IV is the same,OTM spread-the short option is cheaper than the long-so the spread gains value-the long option becomes more expensive,than the short one,not just only from the bigger delta,that apriciates the spread,but olso from the spike in IV. ITM spread apriciates the same way from the move-you got the same gain from the deltas,as the OTM one,cause they are syntetics,but the gain of the IV of the spread is SMALLER ,than this of the OTM one,because OTM options are more sensative to IV than ITM. and even they are syntetics,the IV spike will be a plus for the OTM one.