For Black Scholes, Stocks are expected move higher at the risk free rate + be compensated for volatility. Why would you buy a stock if you can buy treasuries and earn free money? Because you like the risk/reward and expect it to outperform a risk free rate. Call options, except in rare exceptions and ignoring dividends, are always more expensive than puts. If you look at 2 hours to on the trading day, daily call options are more expensive than daily put, even though they expire in 2 hours. The assumption is that the market moves higher, because otherwise you'd be a fool to buy a stock over risk free rate. The options formula assumes the drift is risk free rate + volatility. This makes complete sense and calls should be more expensive than puts.
I should add, if their is more and more fear, puts will get more expensive (not necessarily more than calls but more than they "should" cost) because there is a high demand for them. You could sell a put as it is technically mispriced as markets fall, but who would take that crazy risk for such a small reward? That's why utility really needs to be apart of an options equation. As an extreme, if you look at a put option going out 2 weeks that is say 20% out of the money, it's going to be extremely cheap, but someone else needs to take the other side of that, so it will still be more expensive than it "should" be. This is again, due to utility. Who wants to get paid $100 for a 0.1% chance of being wrong and owing a half a million. On the other hand, you may not mind paying $100, even if the real price is $25, because being right is life changing.
By the way ... I think TSLA APR11 is cheap. The ATM straddle is 28. I would price it around 36. But luckily I am not a market maker So I don't know ... It's been moving +15pts per day the last few days, Yes, it has not gone anywhere but ... still.
All I know is on Friday around 3:30, prices went haywire on TOS.. Options quotes in NVDA had the bid 3 dollars higher than the offer..It was a mess
Hello Sekiyo, It does not matter if its Puts or Calls, all that matters is are you betting it ALL or betting a little money? Do not worry about the value and all that stuff, just get IN, and bet it all.
Unfortunately … Going all in has not been a viable strategy for me But I know you guys are more Elite than me. I would rather find a trade that makes sense, & risk an amount I am willing to lose, & except a decent multiples.
I have found another reason why calls are more expensive. Let's say WXY stock trades @ 100$ If WXY goes up 5% each day over 5 days: 127$ or +27pts If WXY goes down 5% each day over 5 days: 77$ or -23pts For the same % moves, Calls will appreciate more than Puts. & as price goes down, the IV's stock price component depreciates.