Great ARB in FRO, Help

Discussion in 'Options' started by lizmerrill, Oct 7, 2007.

  1. Correct me if I am wrong here:
    For symbol FRO (Frontline), close of 50.63 on Fri,
    Go short at 50.63 100 shares, and sell a 50 put at 3.00 (bid).
    Buy a 50 call at 1.10 (ask),
    for a locked in gain of 2.63 points.

    By going short and selling a put, you are effectively selling a synthetic call, cover your call simultaneously at 1.10 for
    a lock of 2.63 points.

    What's the catch?

    Liz
     
  2. the catch is that they are going Ex-Dividend on 10-Oct-07 for a huge div. sorry. you'll have to try harder.
     
  3. MTE

    MTE

    When are you rookies gonna learn that there are no arbs in options! If the options are priced a certain way then there's a darn good reason for this!
     
  4. 1) There are no free lunches

    2) If it looks too good to be true, it is

    3) See OP's reply that they are going Ex-Dividend on 10-Oct-07 for a huge dividend
     
  5. Nothing changes - same questions, same mistakes.
    But how else will the newbies learn? And we were all newbies once, right?
    db
     
  6. OP??? :confused:
     
  7. he means Old Prick
     
  8. non-profit suits you better
     
  9. OP = Other Poster
     
  10. I always thought it was Original Poster?
     
    #10     Oct 8, 2007