Why Implied Volatility Quotes Can Differ Across Option Chains

Summary

The document considers why options on the same stock and expiration can show sharply different implied volatility readings, including around a stock split. It points to quote quality and calculation choices as likely explanations rather than evidence of a risk-free arbitrage opportunity.

Delayed or stale option quotes can misrepresent current prices, while closing quotes may be distorted by wider bid-ask spreads. Wide and uneven markets, especially on the call side, also make inferred volatility sensitive to which price a data provider uses, such as the last trade or quote midpoint. The discussion offers these as diagnostic possibilities, not a confirmed explanation of the particular chain. It gives no measured comparison or formal arbitrage test, so the discrepancies cannot be resolved from the document alone; current, executable quotes and the provider's IV methodology would need to be checked.

Key ideas

• Stale or delayed option quotes can produce misleading implied volatility readings.
• Wide bid-ask spreads, especially around the close, can distort inferred volatility.
• An IV estimate can vary depending on whether it uses a last trade or a quote midpoint.
• A displayed discrepancy alone does not establish an executable arbitrage opportunity.

Tags

# Why would option chains' IV differ, for the same stock and expiration?


# Why would option chains' IV differ, for the same stock and expiration?












I believe that the right-hand side refers to options sold before CHK split its stock on Apr 15 2020 1 for 200. 1. But why do the IV differ so much, e.g. at the strike price of 3?

- Why hasn't this difference in IV been arbitraged?

## Answer by Bob Baerker (score 0, accepted)

https://quant.stackexchange.com/a/57535

Why are the IV numbers all over the map?

Are the quotes from real time? If delayed, they're useless. Some of them could be stale (last option trade occurred at a much earlier time). If closing quotes, bid/ask spreads widen significantly after the close, distorting price relationships.

The put spreads are reasonable compared to the call spreads, some of which are 2 to 4 dollars wide. Where is the actual market on the call side?

How does the provider calculate IV? Last trade? Midpoint?

The best that I can offer is that if the difference could be arbitraged, it would be arbitraged. The disparities exist so that means it's likely due to one of the possibilities that I mentioned.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.