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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: John Vosilla who wrote (57289)7/6/2006 11:22:53 AM
From: ChanceIsRead Replies (1) of 306849
 
>>>Noticed the calls seem to be somewhat more expensive than the puts. Anyone have a logical reason?<<<

You made this observation over an hour ago. Right now things are lined up: WCI Jul $20 call bid $0.30 with the corresponding put bid $1.15 with the underlying at $19.15. IOW - synthetic shorting of the $20 put via buying the equity and selling the call has the same premium as shorting the put directly.

Having said that, I have seen big discrepancies when the underlying is not available to short - see JOE. It happened to Calpine for the nine months preceeding its BK filing.

Sometimes this happens with thinly traded stocks - see DSL. The options market maker there can be a real bear.

I have seen "hysteresis" in options. With the WCI downgrade this AM. One would suppose that the puts would be bid way up, especially relative to the calls. OTOH, shorting the calls on bad news can be a good play. As wise old option trader once told me "a put is a call." IOW one doesn't know the intentions of the traders, or how they are going about entering a position. I hate it when a credible publication like Barrons cites the put/call ratio as some talisman of the market direction. I think it meaningless.
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