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How often are call and put options mispriced?

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  • How often are call and put options mispriced?

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  • #2
    If you’re speaking of a call and put with the same strike price and expiration, in the U.S. it rare. You may notice a difference in the implied volatility for a moment but its just a small retail trade that took place on bid or offer - making the strike appear mispriced.

    If you’re speaking about out of the money options, implied volatility can pick up or drop off changing the ‘skew” or investor expectation of that strike price being in the money at expiration. The option isn’t mispriced in an of itself. However, it may differ from YOUR opinion.

    Summary: Mispricing should be seen relative to your opinion of forecast volatility.

    Hope this answer was helpful and you enjoy the rest of your evening

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