Stats › Options, positions short et positionnement › Options as lotteries
Far out of the money options lose money because they are lottery tickets, not because they are far out of the money
| Options and maturity | Low skew | High skew | Spread | t |
|---|---|---|---|---|
| Calls, 7 days | +1.87% | -35.25% | 37.11% | 7.56 |
| Calls, 18 days | +0.22% | -8.76% | 8.98% | 4.07 |
| Calls, 48 days | +0.83% | -2.58% | 3.40% | 5.05 |
| Puts, 7 days | -5.38% | -59.98% | 54.60% | 14.13 |
| Puts, 18 days | -0.90% | -13.73% | 12.83% | 3.92 |
| Puts, 48 days | +0.02% | -3.16% | 3.18% | 1.94 |
Weekly returns to quintile portfolios of individual equity options sorted on ex ante total skewness, portfolio formation dates 1 February 1996 to 9 October 2009. All figures are gross of transaction costs. Weekly spreads of this size are not attainable net of bid-ask spreads on seven day equity options.
Sorting equity options on ex ante skewness produces weekly long short spreads of 37% in seven day calls and 55% in seven day puts. Controlling for skewness, the moneyness spread is small and mostly insignificant, which inverts the usual explanation.
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