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Would following approach be suitable:

First calculate European option price (does it even make sense to do so, if we are talking about less than 30 dte?), take the diff between European and American option price, after which you regress on strike against put-call parity and solve for funding, borrowing, etc.

I am ignoring any dividends as I am talking about short-dated SSOs. I want to keep it as simple as possible and not include dividend schedule, stochastic volatilities or the like.

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Borrow rates in single-stock options affect their prices in a few different ways. Firstly, when the borrow rate is high, it means that it costs more to borrow the shares needed to sell the option. This increased cost is passed on to the option buyer in the form of a higher premium. Secondly, when the borrow rate is high it also means that the potential for profit is reduced. This is because when the stock price falls, the option will be worth less than the cost of borrowing the shares. As a result, high borrow rates can act as a deterrent to option buyers and lead to lower prices.

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  • $\begingroup$ The first mechanism is classic and important: the option is more difficult to replicate and so its premium is higher. The scond I have not heard before and I don't really follow. $\endgroup$
    – nbbo2
    Nov 20, 2023 at 10:33

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