option arbitrage....examples ?

Discussion in 'Options' started by jjk2, Jun 30, 2008.

  1. cvds16

    cvds16

    not everyone pays the same intrest rate ...
    not everyone is taxed the same way on dividends ...
    but for the rest all things except vol are constant
     
    #21     Jul 2, 2008


  2. hmmm, we were doing it quite succesfully in 2002/2003.

    thanks,

    surf
     
    #22     Jul 2, 2008
  3. Ended in July 2003 with the full implementation of "linkage."

    No more inversions (crossed markets), no more credit flys.
     
    #23     Jul 2, 2008

  4. thanks. got out just in time.... is anything similar available now?
     
    #24     Jul 2, 2008
  5. Not completely true. If there is a possiblitiy of a rate change before expiry then different traders may have different opinions on the likelihood and magnitude of the change. Similarly for long term options estimates of dividend growth rates come in to play.

    Either or both of these factors can set up near-arbs.
     
    #25     Jul 2, 2008

  6. Inverted markets ended at the time of the COMS/PALM spinoff. I know because I/others caused the linkage to be implemented. It was early 2000.

    The "Last Atlantis" method you were trading was a "pick 'em" trade, not a crossed market. No crossed/inverted market inter-exchange indication [3.00 x 2.80] was executable after the link was implemented in 2000.
     
    #26     Jul 2, 2008
  7. yeah, it was a pick em from the traders end. however, we would see the inverted markets all the time, and on occasion be able to execute. no kidding.

    surf
     
    #27     Jul 2, 2008
  8. Just a question, unless you were pure retail customer why would they even allow you to lift the offer or hit the bid infront of the mm's.

    Back in 2000 I was a mm in the SOX options pit, it was a single listed index so there was no possibility of a crossed market. Prior to that the only equity option i made markets in was DELL for a few years while it was single listed.

    I had exploited crossed markets in other options products besides equity based ones for a long time in the 80's and 90's but never as a customer
     
    #28     Jul 2, 2008
  9. Surf, you weren't executing a crossed equity option, post 2000. If you were filled it wasn't crossed. I'll bet that nobody here can produce a run showing a fill on a crossed equity option past March of 2000. If so, feel free to take my money. Crossed markets would appear but the link would lock the market and alarm at the DPM.
     
    #29     Jul 2, 2008
  10. RAES with customer priority on 20 lots or less with an IB retail account. I took the COMS-crowd, among others, for >$1MM in late 1999 in 20 trading days. By the time I had it automated it was closed, a Monday, IIRC. IB went to bat as there was an attempt made to bust the trades. The 15-second rule was implemented as well:

    http://www.interactivebrokers.com/en/accounts/legalDocuments/raes.php?ib_entity=llc#0141

    COMS had all the volume and vola during that time. I recall markets in the front-month 80C of 3.00 x 2.75 all day long, and some markets were crossed by as much as $.50.
     
    #30     Jul 2, 2008