#Special Relationship and the added dimension to VWAP.

As we know the expiry’s final settlement price is the last 30 minutes-weighted average price of the spot market. Due to this, many investors/traders get confused with the prices and some option prices may look like an arbitrage or free money (options quoting below intrinsic value).

This may not be correct as the spot prices are moving independent and not according to the VWAP whereas using futures prices are quoting at the calculated VWAP and it’s taken care by the arbitragers if any deviation occurs market arbitragers would jump in and be sure they will jump in before you could do. So, if futures are referenced in the last 30 minutes of expiry, these circumstances and confusions can be avoided. Hope this helps.

Special Relationship and the added dimension to VWAP.

As we know the expiry’s final settlement price is the last 30 minutes-weighted average price of the spot market. Due to this, many investors/traders get confused with the prices and some option prices may look like an arbitrage or free money (options quoting below intrinsic value).

This may not be correct as the spot prices are moving independent and not according to the VWAP whereas using futures prices are quoting at the calculated VWAP and it’s taken care by the arbitragers if any deviation occurs market arbitragers would jump in and be sure they will jump in before you could do. So, if futures are referenced in the last 30 minutes of expiry, these circumstances and confusions can be avoided. Hope this helps.