TLT - Fly Bid-Ask Spreads

UL - 105.40

103-106-109 Oct 4th Call Fly - 1.33/1.47

102-105-108 Oct 4th Call Fly - 1.33/1.58

Quite a difference there.

 

So?

 

Buy the call fly?

 

Yes, bought the 103-106-109 at 1.39 mid, filled quickly which was a surprise.

 

A bit surprised that one strike difference in the body could make such a difference in the spread, given the UL was in between.

 

One is OTM the other ITM. It makes sense that the OTM would be a tad cheaper.

 

I see your point but one spread is about 10% and the other 19%. They could have a higher price with a fairly similar spread in percentage terms, but then I suppose it's all what they can get away with charging, ie demand and supply. The 105 calls had the highest OI, with all the other strikes just a fraction of it.

 

Especially on spreads centered around the ATM strike with a little more distance between the body strikes, the skew might be able to help explain the differential (that may or may not have been true in this case or the effect might have been minimal since the flies were so close together).