Monday, September 9th 2019
Option Greeks Are The Same For Calls And Puts
Options have premium and intrinsic value. Using interest, dividends and solved residual rates, ORATS isolates the premium and can use one number for calls and puts for the greeks.
ORATS believes in equality of calls and puts, with nearly the same implied volatilities, equivalent premiums, and consistent greeks. By isolating the equivalent premium in the call and put of each strike, risk can be managed with one delta, gamma, theta, vega, rho, and phi number for each strike.
Here at ORATS, we believe in equality of calls and puts. The implied volatilities should be nearly the same. The call delta and absolute value of the put delta should add up to one. The greeks should be the same.
Put call parity should isolate the equivalent premium in the call and put of each strike. With equivalent premiums, the risk can be managed by using consistent greeks.
That is why you will see one delta, gamma, theta, vega, rho and phi number for each strike.
ORATS works hard to get the best dividends, interest rates, and then solve for the residual rate, sometimes sloping this rate by strike, to figure out the how to line up the calls and puts.
More reading here:
Options pricing models produce theoretical values for options and implied volatilities. Here we show common methods for calculating IV and how to interpret them.
Implied volatility, contango, and forward volatility can be used to predict underlying movement. Ex-earnings IV for stocks is explained. Backwardation is described as is the flat volatility method.