Hey guys,
I have a theoretical question about volatility skew.
Say current stock is at 100, and the 90 put has higher IV than the 110 call. So, the market is implying a potential likely downside move as many participants are buying the 90 put. In this case, it is likely then that the 90 put is being bought more than the 90 call, and hence I would expect it to have a higher IV. However, by put-call parity, you would expect the same strike put and call to have identical IVs.
What has to happen for the 90 call IV to match the 90 put IV. Do we need to adjust the forward to achieve this?
Posted by Terrible_Ad5173
1 Comment
The only difference in Greeks between the 90 call and the 90put is the delta… has same gamma, same theta, same Vega (which is IV)… if you start looking at deep in the money options, American premium can play a little bit of a role… but for the most part the 90put=90call – intrinsic value