Indicators
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.
Summary
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:
https://blog.orats.com/understanding-options-why-do-calls-and-puts-have-different-implied-volatility
Disclaimer:
The opinions and ideas presented herein are for informational and educational purposes only and should not be construed to represent trading or investment advice tailored to your investment objectives. You should not rely solely on any content herein and we strongly encourage you to discuss any trades or investments with your broker or investment adviser, prior to execution. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. Option trading and investing involves risk and is not suitable for all investors.
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Be sure to read the OCCs Characteristics and Risks of Standardized Options to learn more about options trading.
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