Stepan, one thing you need to take into account is to remember something very simple but that still trips everyone looking at end of day option prices: 1. SPX ceases updating values for the day at 4:00PM 2. SPX options trade until 4:15PM. So there are 15 minutes where the option will trade but the underlying will remain the same so it throws pretty much any end of day computation in disarray (when using the SPX value as an input).
I forgot to add here that a common methodology to solve this issue is to compute the underlying price at 4:15PM by using something like the CBOE does for VIX, just use the put call parity to your advantage: 1. compute the absolute value of the difference between put prices and call prices: abs(C-P) for each strike. 2. Pick the strike with the smallest difference. Let's call it K. Now using the put and call prices for K, compute the SPX level as: S = C-P+D*K Then use that level to do all your computations with end of day option prices. I hope this helps.
blueplayer: I understand. That is why I am looking at traded prices during the last 5 minutes of trading (prior to 4:00PM Eastern) for resolving the basis for the anomalies observed. -- my apologies for misprinting your handle as "blueray" previously in this thread. --- BTW: It is beginning to "smell" like the absence of including "dividends" may be my primary issue. I made the BAD assumption that SPX options were immune to dividend impact.
It does make a huge difference in particular as you move farther away in expirations. Also for the sake of accuracy use the following website for the risk free rate for SPX: https://www.treasury.gov/resource-c...interest-rates/Pages/TextView.aspx?data=yield Also please remember to use the rate that is closer to the option expiration (like 1M for near options, 3M for farther away and so forth and so on).
Another 2 cents: 1. Better to separate and isolate the S&P 500 Index against the SPX Options by treating them as two exclusive/different products/derivatives (of similar names, whether trade-able or not)! In order to minimise confusion/risk! imo (Of course, I could be wrong very much) Even the final official EOD price for SPY can be adjusted often very much after market close, sometimes Really very much! 2. Sometimes a small edge may not be useful at all: http://www.elitetrader.com/et/index...rity-and-american-style-options.288012/page-2
I am very curious why the SPX PUT Implied Volatility "appears" to ignore SPY Dividends! -- rmorse made comment that TOS does not include dividends in their calculations for SPX options. My observations seem to CONFIRM that statement. However, can anyone shed insight on why SPX PUT options seem immune to dividends? -- When I attempt to resolve SPX option movement with the available data, it seems SPX CALL options track closely with dividends in SPY (div X 10), but PUT options assume zero dividends (from the observed behavior). To remove my data and algorithms from this evaluation (which may have a flaw), Look at the TOS Product Depth for SPX PUT Implied Volatility graphs. You will notice well defined behavior for all Expirations, with upward facing curves. This corresponds with my plots IF I do NOT account for Dividends. This is the Graph that I would expect (implying dividend impact, if present is negligible). If you notice the SPX Call Implied Volatility graphs here, you will observe some odd looking graphs (which looks like those I produce when I fail to include Dividends). If I include dividends in my SPX CALL option calculations, the CALL IV Graphs appear more like those SPX PUT IV graphs, which seems to make sense to me. Is it possible that the impact of Dividends on SPX PUT options is negligible, or near negligible? <-- This would fit my observations. ERATTA: I miss-quoted rmorse: "...TOS, which will never use proper interest and dividend flows"