Why are these deep in-the-money FLEX options seemingly bought at a discount?

Question

98% of the initial reference value is .98 x 267.88 dollars, which equals 262.52 dollars. However, the market value of each call contract they purchase is 247.42 dollars.
How are they purchasing these call options at a discount?
Here's the link to the prospectus (the reference value is on page 8, and the options price is on page 21): https://mplusfunds.com/defined-preservation-95-fund-fact-sheet-standard/prospectus-alaia-series-7-1-defined-preservation-95-fund-10-31-18/

ryc · Answer

SPY pays dividends ~1.8%, and the expiry is ~3y (as of date was 2018, 2021 expiry), so the it looks like there is a discount

Assuming $0 time value

$$OptionValue=Intrinsic Value+Time Value $$
$$OptionValue= (S-K)-Dividend$$
$$OptionValue=267x(1-0.02)-267x1.8%x3=\$247$$

Preston Lui · Answer

I suspect that the reference value is, well, only for reference and not the real price.
Maybe the price of SPY when the call contract is bought is lower

Why are these deep in-the-money FLEX options seemingly bought at a discount?

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