that might explain the "paradox".....looks like i might have been wrong(really dont want to surrender,i cannot find an argument against it) its the dividend,after all,not the IV as i thought...... but still there is a difference i ve noticed that,but never knew there is a dividend prising in SPY. and still there's something else-lets get the same example: SPY 90 strike sep/dec: put spread-215$ call spread-165$ and a little impossible scenario- drop in IV to 10%,drop of the underline to 90,at sep 3(no change in dividend prising) the call loses 25% of its value,the put spread 45% of its. why would they change so diferently at my calculator,if there's no IV relation?
the calendars should rise in value, not fall. the IV crush hurts them both, yes, but the move toward the strike should help them both by a greater amount. btw in the situation you cite, IV will almost certainly rise and not fall should SPY move down from 103+ to 90. the call calendar may outperform on a percentage basis in this particular (dividend) situation, because the drop in delta of the long Dec call makes the dividend payout less painful. in other words, you originally paid less for your call calendar than the put version because the dividend implicitly hurts the high-delta, Dec 90 call. as the underlying drops and the long call delta falls with it, the dividend payout hurts you less, so the call calendar spread may widen more than the put version.
here is an example using GE Sept/Oct calender calls on 14 strike price Calendar Call 14 strike price Sept +GEWIN 0.51 0.52 0.52 -0.08 5,317 Vol. 143,084 Oct GEWJN 0.85 0.87 0.87 -0.07 1,792 Vol. 13,849 Price difference .85-.51= 0.34 Calendar Put 14 strike Price Sept +GEWUN 0.47 0.49 0.48 0.03 8,860 Vol.74,763 Oct +GEWVN 0.86 0.88 0.89 0.06 2,486 Vol. 13,672 Price difference 0.86- 0.47= 0.39 Price difference between the to is 5 cents, thatâs a 12.8% difference if they are identical, why the 12% diffrence. Not trying to be condescending but why the diffrence?
because GE goes ex-dividend by .10 in Sep. http://www.ge.com/investors/stock_info/dividend_history.html
very true, i think the main diffrence between the two is what you do with the back end, other then that I would agree they are the same.
IV_Trader brought up a good point. the greater the interest rate, the higher the debit for the call cdr will be so since the cdr buyer loses the debit when stock goes away from strike at expiration, it could make a difference in the payoff. However we are talking about interst rate > 7% for it to start making a difference. I moved the IR to 10% and the debit of the call vs put cdr is $44 vs. $68 in my prev example.In spite of the prem difference with stock at $30 at expiration, the call cdr loses $31 vs $26 on the put cdr.Only stock lower than $30 does the bigger debit start to come into play. Ex- at 24 the call cdr loses 69 vs 44 on the put cdr. Thanks A.