Why are C calls so cheap?

Discussion in 'Options' started by turkeyneck, Jan 22, 2008.

  1. spindr0

    spindr0

    They're pricing in the 31 ct dividend for 1/31

    If you check the "Include Dividends" box at OX, the IV of the calls will be in line with that of the puts.
    You might want to indicate how you are determining theoretical value as well as why you think that the options are below it.

    There are a variety of things going on in the quote chain:

    If you don't include the dividend, the calls look undervalued.
    Later months have lower IV than near months.
    And then there's the volatility smile.

    We have no clue what you are referring to since you are not being specific. Care to elaborate?
     
    #11     Jan 23, 2008
  2. I agree with previous post. Gives us: strike, price, vols, time, and carry.

    Here is how to compute the carry. Go to ATM strike. Compute the difference between the call and the put price. You then have the (interest-dividend) you should use. Interest is known to everybody, but dividend is in the future and should be known to the people who know more information than you and I on this.
     
    #12     Jan 23, 2008