Check out the action in NWAC sep 2.5 calls. Huge bids at a 600 vol for the easy money crowd. Saw them pay 30 and 15 cents with these ootm by a buck.
take a look at the range today and the rumors that are floating around - NWAC could easily be zero or $3.30 in the next couple of days .05 bid for you........
meaningless if you think it can only go one way (ie down) if you can admit that it can easily go to zero then the implied will go up for the $2.5 puts which will push up the vol for the calls. Buying calls and shorting stock = buying puts thus if you are willing to pay .10 above parity for the $2.50 puts (ie IF NWAC = $1.50 AND you willing to pay $1.10 for the puts then you could easily do this by paying .10 for the calls then shorting the stock at $1.50) As long as traders are willing to pay up for the puts (which they are) then the arbs (me) will have a bid for the calls.........
Guess you're right. The volume in the options was very small vs the stock trade, but maybe there was a few cent arb in there. I don't believe there was more than that at any time, and they were paying up for the calls, because no one was hitting them unless the stock was tanking. Seems like a lot of work for a few cents. Did anyone just roll the dice and sell a few thousand of these sep's at 15-25 cents?
You know, this was a real easy trade, not that impossible stuff riskarb like to strut around. Does anyone without a phd in calculus understand what he does?