CIT Butterfly

Discussion in 'Options' started by erol, Oct 28, 2009.

  1. erol


    I'm on TOS and looking at a CIT butterfly for a 0.02 credit

    this is a DEC 2 - 1.5 - 1 butterfly

    I'm assuming this is too good to be true. What am I missing excluding commissions?

    The IV is insane on these options.
  2. "What am I missing excluding commissions?"

    Nothing. But can you get filled at those prices?
  3. the IV is not really out of line for a 1.50 stock and its been at these levels for a long time.
  4. ellevers


    The stock is very hard to borrow which is why the reversal is also setting up for a huge credit.
  5. Borrow rate is 113% at IB.
    Nice gig if you can get it :)
  6. erol


    ok spin, i didn't think about that thanks.

    pardon my ignorance, but if the stock is hard to borrow, how does that affect the put prices in such a way that makes them sell for a credit?
  7. What ignorance? You cited a butterfly for a credit. The only risk would be if done for a debit.

    The "I want your kidney" borrow charges only apply to short stock.
  8. erol


    i read in a TOS article that sometimes we think we've found a deal but really there's a dividend or interest play or something that's priced in that most people arn't accounting for that the market has...

    so I figure the butterfly has to have something hidden.

    My commission structure precludes me from obtaining the butterfly for a credit (assuming I could get filled at those prices).

    Actually, it was going for 0.05 yesterday too
  9. There are no free lunches so the TOS article is dead on.

    I won't swear that there's no possible hidden catch in the 1/1.50/2 put butterfly but I can't think of one. Ignoring the credit, the spread has a $ of risk and a $ of reward outside the strikes. That's a given. But even if there is something hidden, since you're long two puts for each two short, no matter what they stick you with, you have the right to stick it to someone else, no matter what the adjustment.

    If someone sees it differently, feel free to fill in the missing puzzle piece.
  10. erol



    thanks spin!
    #10     Oct 29, 2009