[Quantlib-users] Query on the Option pricing traded with 0 time value

[Ashish B. <ash...@gm...>]

Hi All,

In 1 of the exchange traded option market I see strange behaviour which is
failing our quantlib code to value the options. The put options for nearby
month are trading only at the intrinsic value with exactly 0 time value
although a good 1 month is remaining in expiry which is 4th Jan 2023.
Future quotes (underlying) as of 5th Dec:
https://www.cmegroup.com/markets/agriculture/dairy/nonfat-dry-milk.quotes.html
[image: image.png]

Option prices as of 5th Dec:
https://www.cmegroup.com/markets/agriculture/dairy/nonfat-dry-milk.quotes.options.html#optionProductId=782&strikeRange=ALL&expiration=782-Z2
[image: image.png]

Time value in the above trading: 16.425 - Max(160 - 143.575,0) = 0

We are using the blackscholes engine with American option and using
option.impliedvolatility method to calculate the market implied volatility
for these options. For these options, we are getting runtime error as root
not bracketed error:
RuntimeError: root not bracketed: f[0.0001,4] -> [6.394885e-14,5.818200e+01]

How should we price these kinds of ITM options?

Thanks
Ashish Bansal