Free lunch on Friday 13th ?

Discussion in 'Options' started by spec77, May 14, 2011.

  1. spec77


    Hi All,

    Yesterday at 16:07 p.m. (EST) ES Jun traded at 1333.5-1333.75

    May13 1345 Put option traded at 6.00-9.75

    So I can buy the 1345 Put for 9.75, the UL for 1333.75 and then exercise. The profit will be 1.5 ES point, riskless

    Am I missing something here ?
  2. Did you buy the option? Was it filled?

    Sometimes there may be inefficiency in the market, so you might had caught one of those occasions, my 2 cents.
  3. It reminds me of the times when I am looking for a parking spot on a busy street where every spot is taken except one nice spot. I ask myself, why this spot is not taken? Is there any sign? Can I park here? I also see other drivers who are looking for a spot are confused too. They get to that spot and then hesitate a little and then go. Then a bold driver comes and take the spot and everyone regrets why they did not do that.

    You should have done that trade. Yes free lunch exists specially from 16:00 to 16:30 time frame
  4. spec77


    There are some anomalies in the after hour trading. I can understand why put-call parity is often violated. But last Friday free lunch was way over my head. You're right, I should have taken it :)
  5. there are a few issues:

    you can't exercise spx options. they are european. secondly, the may options will price off the may forward which might be 1.5 points higher than the june futures. i don't know what the futures basis is these days.

    finally, you might be looking at stale data on the options or the futures. the spx options are the most liquid and efficiently priced options out there. it is extremely unlikely that there will be a glaring mispricing even in the after hours. a lot of spx index options trade in the 4:00-4:15 timeframe and those in the pit are still very active. you will likely not find put-call parity mispricings in any option class, much less spx options.

    i doubt this opportunity actually existed and if you tried to execute it you wouldn't get filled.
  6. FSU


    I believe the OP was referring to the Weekly options on the future, which expired Friday.

  7. Then it would have been completely untradable as the options expired on the cash close of the S&P constituents.

    He was looking at spurious market data.