Why are PUT Options more Expensive than Call Options - both equidistant from the ATM ?
Investors tend to buy more puts for protection against downside moves, which pushes their price and implied volatility higher. This phenomenon is known as the "volatility skew" or "smirk" in the options market, and it's a deviation from what the basic Black-Scholes model might predict (which would suggest equal implied volatilities for equidistant calls and puts).
But the crux of it lies in Put-Call Parity Relationship
P=C−S+K(e)^−rT
C: Call price
P: Put price
S: Current stock price
K: Strike price
r: Risk-free interest rate
T: Time to maturity in years (1 week = 7/365)
When I calculated using the above formula, didn't get correct values. Nevamind.
Theoretical models might suggest otherwise under ideal conditions, real-world options markets are influenced by supply and demand dynamics, market perceptions of risk (especially downside risk), and the practicalities of hedging.
Some argue that investor psychology plays a role. People are generally more sensitive to losses than gains (loss aversion), leading them to overpay for downside protection
