IWN $5 spread and EMT

Discussion in 'Options' started by qazmax, May 25, 2005.

  1. qazmax


    There are two kinds of traders in the world...
    Those who believe in efficient markets and those creating them.

    Anyone want to know why someone would pay $5 for a $5 call spread?

    IWN anounces a 3-1 split this morning.
    Institutional desks buy 8800 JUN 155/160 from the floor MMs

    The 155 strike become 51 5/8 strike rounded = 0.0417 diff
    The 160 strike becomes the 53 3/8 strike rounded = .0420 diff

    Net 0.0837 * 26,400 contracts = $220,968 locked in

  2. Sorry,

    A bit slow here. Why would the exchange round the price of the contract by that much? As you point out it creates an instant loss for someone...
  3. qazmax


    Strike prices are set in 1/8ths not pennies.

    Only an instant loser if you didn't realize before you sold.

  4. Neat little trick to know...probably programmed into some bank's computer. lol

    Thanks for the explanation.
  5. qazmax


    Or if one was a conspiracist (sp?) one might think it was someone at Barclays, since it was their first split ever in the iShares. Looks like the trade went off just before the Yahoo news story. Not sure what time it was actually released.

  6. DJ News frequently scoops the others by as much as a minute or two so it is entirely possible that there was no evil intent. :)
  7. qazmax


    This is 20 minutes.... between Yahoo news and time and sales.

    And that is what time the options floor hit the tape. I am sure it required some foot work by a floor broker and some crowd negotiations. So lets say another 5 minutes.

    Anyone have tradethenews or something fast to compare this to?