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I'm looking at ITM call options for the ESTX50 price(not total return) index. I notice that they gradually become cheaper for the same strike price, the further the expiration date is. The prices per 1 contract for the same strike change approximately like this:

  • 1 month ~ 2041
  • 2 months ~ 2031
  • 3 months ~ 2025
  • 5 months ~ 2021
  • 7 months ~ 2014
  • 1 year ~ 1951
  • 2 years ~ 1867

Such discounts exist on the different strike prices and seem to be persistent, steady, and graduate. So the question is:

What exactly drives it?

I can think of a couple of explanations - as they account for expected future dividends that the companies pay or maybe some sort of implied interest, but I'm not satisfied with any of them for different reasons.

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I don't have access to the ESTX50 price index or its options so I don't have a specific answer for you.

Here in the US, dividends increase put premium and decreases call premium so it's likely that's what you're observing. The larger the dividend, the greater the disparity.

This effect would be more noticeable in underlyings with low implied volatility because subsequent expirations would not have large increases in the amount of time premium.

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