Hmm...well it's a 1/2 billion dollar trade, so I'd assume that they know what they're doing. A good looking trade, but I don't understand your statement. Assuming that they keep the trade intact, what about the scenario of the calls ITM enough to be assigned before ex-div? Then they'd lose the div. And they'd have to deal with the put side. And they might lose value in the American style calls, or rather, through the inability of the calls to maintain P/C parity. I'd say low probability of this happening, but it's possible. Perhaps they have enough cushion with the forward to handle just about anything. There may be an outside chance that just the yield gets whacked, hence your statement.
So what was th Got it. I assume this benefited both side. Both the Delta One firm and the customer that has a different cost of capital and maybe from a country with different dividend taxes.
How did our friend's position work out for him today? I wonder if he closed anything out or is waiting for more pain?
It's not a spread with that kind of risk. It's delta neural and the only risk is from dividend and interest rate changes. It's a conversion: Long Stock+Long Put +short call
Well, I don't understand these kind of strategies and to be honest I don't want to understand them. The only thing I know is that in 2007/2008, lot of guys developed complex optional strategies and most of them are not here anymore because their models ultimately exploded. As of today, i just want to be LONG PUT Apple (90? 80? 70 maybe?) and SHORT Nasdaq if support breaks. Basic, but i know what is my risk and when i am wrong.
As of yesterday, Put 10/18/14 strike 90 quoted 0.87/0.89, which was 1% of the price. Not given, but not expensive too. Target is at least 10, which means that during next 2-3 weeks, Apple must go below 90. Good reward/risk i think, similar to september 2012 ! A well-known female philosopher said : "Oops, i did it again". Well, what about Apple this time?