Discussion in 'Options' started by jjk2, Jun 30, 2008.
is there a book on this ? perhaps your own insights? is it very profitable ?
basic arbitrage is buying a 100 strike call for $8 and shorting the underlying when the underlying is trading at $110
profitable arbitrage +15 years ago was combos ...buying underlying and selling the synthetics. Or buying anyting and selling synthetics (and vice versa)
none of this is profitable anymore.
arbitrage opportunities are meant to be discovered on your own, as they become obsolete if exploited by many.
Nobody in their right mind would share it with you if they're arb'ing in any particular manner.
i did not ask for a specific technique but merely at some ballpark where most ppl would find opportunities.
I would think that the computerized market making firms removed the option arbitrage opportunities long ago.
Maybe there are some arbitrage opportunities in the exotic options.
The basic arbitrage (put-call parity and etc) is absolete for a retail off-floor trader.
those days are long gone, if you consider pure arbitrage, one might consider market making in options is in itself a kind of arbitrage trading if done well, althoug on a statistical basis. If you want to read something: 'Option market making' by Baird gives you a pretty good idea how it is done. http://www.amazon.co.uk/Option-Mark...=sr_1_1?ie=UTF8&s=books&qid=1214895907&sr=8-1
how about finding mispricings / discrepancies in IV?
It makes sense that different valuation methods and tools would result in different perceptions regarding the extrinsic value of certain options.
And how do you define IV mispricings/discrepancies?
There's no single correct IV value, so how would you determine that a particular IV number is "wrong"?
or in other words ... what about skew ... or are you saying Black and Scholes is correct ? don't think so ....
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