Why might a deep ITM call have a low implied volatility?

Discussion in 'Options' started by Alex the Great, Feb 26, 2011.

  1. I don't want to quit ,I love to learn, I can use this site as a refrence book -.-. But yeah you can profit from deep itm contracts but I don't like paying high for a option contract. But I forgot everybody has different Trading Rules and Trading Theory. So that's where i'm wrong at. But hey whatever works best for you if you make money buying deep itm contracts go for it.
     
    #11     Feb 27, 2011
  2. tomk96

    tomk96

    what product? the VIX is the only product that comes to mind with low vols on ITM calls.
     
    #12     Feb 28, 2011
  3. surfer25

    surfer25

    Nate, buddy... I hope options aren't your main trading vehicle.
     
    #13     Feb 28, 2011
  4. dmo

    dmo

    That's an illusion, caused by the fact that whoever you're getting your IV's from is no doubt using the cash vix as the underlying in its calculations, rather than the vix futures contract of the same expiration as the options (which would be correct).

    There's a free video at http://masteroptions.com/?p=82 that explains it well.
     
    #14     Feb 28, 2011
  5. tomk96

    tomk96

    no, you are wrong. because higher VIX correlates with SPX puts, the skew is essentially inverse a normal index skew. ITM call, OTM puts have a lower vol than the OTM calls, ITM puts.
     
    #15     Feb 28, 2011
  6. Lmao I'm Human just like you are we make mistakes. Even Professional Traders make the simplest mistake just because I was wrong on something that was simple by just checking my trading platform doesn't mean It's the end of the world for me.
     
    #16     Feb 28, 2011
  7. surfer25

    surfer25

    Don't get me wrong, I love your enthusiasm and you seem like a good guy. And you are absolutely correct, we all make mistakes frequently. I was just saying that I hope options are not your main trading vehicle based on what you wrote regarding them. Your answers indicate that you don't really understand the concepts you are discussing and I would rather see you learn more before risking too much on option trading.
     
    #17     Feb 28, 2011
  8. You should have a working understanding of synthetics and how to mark a fairval on every strike by solving for a call(put) price if you have the put(call) price and spot. You're at a disadvantage w/o the basics.
     
    #18     Feb 28, 2011
  9. tomk96

    tomk96

    too late to edit. the vix calls correlate with SPX puts, and vix puts correlate with SPX calls.


    a friend that trades ags. has told me his skews are essentially the same at the vix. more premium to the calls.
     
    #19     Feb 28, 2011
  10. tomk96

    tomk96

    ^^this. pretty much day one of options basics.
     
    #20     Feb 28, 2011