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Maxtodorov

Prices on SPY Mini Options vs Regular

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Hi Everyone, 

 

I have found something that I can not figure out. I am looking at bid and ask prices for SPY mini vs. regular options. I would think that considering that mini is simply 1/10 of a regular option contract, that the bid/ask prices would be same. However it seems that the prices are different. At the same time, the implied bid/ask volatility seems to be identical. Two questions come to mind: 

 

1. Is there potential arbitrage opportunity. (getting 10 mini, shorting 1 regular)?

2. Why implied bid/ask volatility is listed same, but the prices are different?

 

post-84-0-44414600-1370475179_thumb.jpg

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Interesting topic.  On the arbitrage opportunity, I think the trading commissions would eat up any potential small gain.  In your example it would be 11 x 2 = 22 total contract trades to enter and exit the spread.

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if you ever find a situation where you can buy a mini option with the same strike and maturity as a regular option at a lower price than you can sell the other one you have indeed an arbitrage. I doubt that will ever happen though and if it does some machine will be a million times quicker than you to spot it and exploit the error someone else made. however seems in above screen shot the minis are just wider. Including the 10 x higher fees that makes it very expensive to trade these minis!

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