Am I reading this right? You can get paid to take a synthetic short/long position?

Discussion in 'Options' started by IronFist, Mar 9, 2021.

  1. View DNN right now. A 0.5 call is 0.50 to sell and a 0.5 put is 0.05 to sell. This gives a net credit to take a short position.

    A 2 call is 0.5 to buy and a 2 put is 0.95 to sell. This gives a net credit to buy a long position. Seems like this would be better than having a normal position.
     
  2. caroy

    caroy

    First one if you sell the 0.5 call @ 0.50 and buy the O.50 put @ 0.05 your synthetically short at $0.95 and the stock is at $1.03. Not a good arbitrage situation.

    With the $2 strike if you buy the call @ 0.05 and sell the put @ 0.05 you're long at $1.10 and the stock is at $1.03

    So unless you can buy the bid and sell the offer you're losing on the arbitrage relationship.

    Caution. I've had an ambien and a scotch an hour ago so the math may be a little fuzzy in my head. Sharper minds will correct it.
     
    Nobert likes this.