I've realized that the put call difference in major ETFs and indices is not how it usually is.
normally you can extract the risk free rate of return from doing a collar spread on spy
but recently after the rate cut the distribution of return from this trade is not linear.
I use SPY options. I take the call bid price slightly ITM, deduct the amount ITM and deduct from that the ask price of the put. that way i can know the amount i would make with a long collar spread. i double checked everything and did this on the live TOS platform. i also made 1 trade for the 4 days and confirmed the 36$ that you see. this is SPY. highly volatile and highly efficient
this distribution shows no return for very near term and then normal return based on the risk free rate for 4 days out.
0 day out collar brings 0$
1 day out collar brings 0$
2 day out collar brings 9$
3 day out collar brings 16$
4 day out collar brings 36$
A normal distribution under normal market conditions would be something like:
0 day out collar brings 7$
1 day out collar brings 14$
2 day out collar brings 21$
3 day out collar brings 28$
4 day out collar brings 35$
I understand it may have something to do with the rate cut shock but that still does not explain this phenomenon to me.
Why is the put call parity unregular?
byu/Inner-Promotion-9752 inoptions
Posted by Inner-Promotion-9752
2 Comments
How are you measuring these return rates, exactly? Are you estimating value consistently for each sample? Are you using the bid of each of the three legs? The ask? The mark? Averaging them? Taking the median?
Return anomalies like this can often be attributed to systematic errors in estimating price.
Another typical explanation is a glitch in the data or unsual events. Intel halted trading on a volatility breaker last week. That may have contributed.
The put-call parity relationship can break down due to market frictions like trading costs and short-selling constraints. The unusual pattern you’re seeing in SPY options pricing could be due to temporary supply and demand imbalances or specific hedging activity around the rate cut. It’s probably not a permanent market inefficiency.