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Strategies & Market Trends : The OEX... gasp!
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To: Patrick Slevin who wrote (531)2/13/1997 11:04:00 AM
From: Chris Baker   of 658
 
Patrick - I show there is still too much pessism for a significant down move.

Also in my limited knowledge dealers make only relatively minor adjustments in setting the price level of Puts relative to Calls.

Mostly this relationship is set by buyers and sellers, and I think this is in the Futures Market as much as with the index options.

Also I think the dealer adjustments are made based on future projections, usually relative to something like a specific news event or some other event such as Future Prices out of balance with Cash Prices. These projections giving dealer adjustments can be highly complex but in general for index options I don't think the overall impact is very great. The exact mathematical formulas and the degree of dealer input vary a great deal in their details.

Within the Puts and Calls strikes I believe that say Calls at a given strike are maintained mathematically relative to the prices of other Call strikes, based mostly on volatility. The same for Puts.
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