Buying call, selling put at same price

Discussion in 'Options' started by cubical, Nov 24, 2008.

  1. cubical


    I am going to try and explain what I am looking for.

    Is there a website which gives stock options where the net of selling the put and buying the call is greater than the stock price minus the strike price?


    ABC 40 call is 2
    ABC 40 Put is 5
    ABC is selling for 39

    If the stock price doesn't move i will buy the stock for 40 when it is worth 39. So I would lose $1 from the put bing exercised, but gain $3 from buying/selling the options. Neting me a total of $2.

    I am sure this has a name, but I am not sure what it is. Thanks for the help.
  2. MTE


    This is called a reversal and the opposite would be a conversion. This is the basic put-call parity and unless you are a market maker you can forget about trying to exploit the mispricing, which are arbed, if any, within seconds or even milliseconds these days.

    By the way, there's also a cost of carry that needs to be taken into account, which you fail to do in your example.
  3. dmo


    Lovely idea but alas, you're about 30 years too late. Simple risk-free arbitrages disappeared long, long ago. You need a lot more sophistication to win at options in today's environment - and more's the pity. Shows you're thinking though - keep plugging away!
  4. yes. I attended one optionsXpress seminar and one speaker spoke on synthetic options. and their advantages/disadvantages. He said that in the 80s. there used to be an entire floor of analyst.who used to pore over paper/tickers and make the arbirtrage opportunites. getting a dollar or more.

    and now. he mentioend u r lucky to even get a few cents.
  5. The problem with this post and similar posts like yours is these "ABC" examples with numbers pulled from a hat. You should use a real example of a stock you have an eye on. A quick look at a $40 stock shows EFA at $40.56 and the December options priced at:

    Buy 40 Call at $3.30
    Sell 40 Put at $2.25
    EFA is at $40.56

    Buy 41 Call at $2.60
    Sell 41 Put at $2.60
    EFA is at $40.56

    Now do the math, and remember a stock rarely "doesn't move".

    forex-forex :)
    Trading guru
  6. cubical


    Well I initially heard some lady talk about this on CNBC a few weeks ago. She gave an example of one stock where this was valid. I can not remember the stock, but she had one where if the stock didn't move you would make ~%5 on your money. I didn't know if there were more. I figured there wouldn't be. Thanks anyways.
  7. I'm not a synthetics guru by any standard. However, last time I looked, long a call and short a put at the same strike price was synthetic to 1 long share.