0

Shouldn't an option with a lower delta move less than one with a higher delta?

The spy 208 jan put option has a lower delta than the 209 jan put. Why does the 208 have a larger range?

        low    hi     delta
spy 208 3.41   3.80   -.50
spy 209 4.04   4.34   -.55

Range:

208 = .39
209 = .30
  • On what date was that? how do you calculate the high and low? If you just look at traded price you don't have all the information: the bid on spy 209 may have gone to 4.50 but no trade happened at that price (I have not checked). – assylias Dec 9 '14 at 12:45
  • It's in the chain. I'm looking at the range. – 4thSpace Dec 9 '14 at 19:04
1

We'll your point about delta's is likely correct in general and on average. However, SPY contracts are all independent and traded in significantly different amounts. For instance, the 209 contract sees much less volume than the 208 and 210 points just because people tend to prefer round numbers.

Many market makers may continuously update their 208 and 210 numbers showing the full range of the day while their 209 mark may update infrequently or only when someone asks for a price. So the range of the 209 may not reflect the full range of the day.

Also there are other things that affect price variation throughout the day rather than just the underlying price. So this is another possible reason. Probably less likely though as 208 is so close to 209.

  • Thanks. Where is the source on people trading round numbers more than odd? – 4thSpace Dec 10 '14 at 2:19
  • I pulled the trading volume data from Bloomberg for the above, but it is something I've seen consistently for other options as well. Perhaps your price source has volume and open interest so you can get a feel for which options are thinly traded. – rhaskett Dec 11 '14 at 6:23

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.