Back spread synthetic

Discussion in 'Options' started by Eric1977, Oct 16, 2012.

  1. Eric1977


    I just made an observation, and I am wondering if and how it is correct. I trade options in Israel on the MAOF TA 25. I have 2 possibilities.
    1) BUY OCT 1230 CALL for 1360 SHEKELS
    2) SELL 4 OCT 1180 CALLS, BUY 5 OCT 1190 CALLS for a credit of 515 shekels, and buy the 1230 PUT for debit of 890. 890-515 = 375 shekels.

    How is it possible that the same exact position using the back spread/put combination is 375 shekels as opposed to 1360 shekels for buying the 1230 CALL. Is there an advantage to just buying the 1230 CALL? I've checked the prices and I'm sure that my numbers are correct.
  2. Eric1977


    What I wrote above is as far as I can tell, an example of arbitrage. My question is, has anyone found arbitrage in other markets in 4/5 deep in the money back spread ratios combined with buying an at the money put? It seems too good to be true.