Sure, very good question. IMHO this is likely because the market or someone is overestimating how volatile October will be compared to November, which raises October’s option prices more than usual. This call skew, is usually more balanced but seems off here, creating this nice opportunity. Also, small differences in interest rates add to this setup, making November a cheaper option to buy right now. But since these kinds of mispricings get corrected fast, it’s a good opportunity that might not last long, making this trade worth considering now.
As per this chart, you can see that you can't do this trade with the puts. Nov-25 puts are more expensive. I beleive in the near future, that the skews will match, Nov-25 will take back his place and this arbitrage will vanish...
Hi mikadelattretrader - I have been working a bit on a paper (attached) for this strategy. I like the idea and been doing some trades there too! Let me know what you guys think! Appreciated!
Wahoo soniadebaeke !!! This is exceptional. I'm really impressed by the way you use math to nail it. it's amazing. Thank you so much