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

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

Hi all, any views here?

On Tue, Dec 6, 2022, 10:15 PM Ashish Bansal <ash...@gm...> wrote:

> 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
>