Options arbitrage

Discussion in 'Options' started by Mispe, Dec 12, 2002.

  1. How can you guys do anything with options unless it's really long term (like several weeks or so), I've looked into it and the spreads/commisions are just outrageous! Even with what I thought were sizeable moves in the underlyings, the option transactions costs will eat all of it if not more. Am I missing something?
    #11     Dec 14, 2002
  2. Have you been spying ...
    #12     Dec 14, 2002
  3. A lot ...
    #13     Dec 14, 2002
  4. maglia rosa

    maglia rosa Guest

    If you do size, commission is negligible, and if you put on a (pure) arb, you're locking in a profit right away, so never mind the spread.
    #14     Dec 14, 2002
  5. could you be a bit more specific???
    I know I should have given an example or something.
    How big would a change in the underlying (mid cap with not so great liquidity in options) have to be for a straddle to be profitable? The spreads themselves are substantial, not to mention the premium on the losing side. I'm not looking at pure options arbitrage which I guess what you are talking about.
    #15     Dec 14, 2002
  6. Thanks Maglia Rosa. Yes, in that case I agree. But that's not what I'm looking at. I'm more interested in straddles.
    PS BTW, with what broker are commisions negligible if you do size? Didn't see any yet and I am interested in doing quite some size.
    #16     Dec 14, 2002
  7. nitro



    #17     Dec 14, 2002
  8. Gee, guys. That is reassuring. I'm glad you found the time to explain what you meant. I asked a very specific question. I am not experienced in options trading and don't pretend to be, so I don't see the point of sarcasm and cynicism. If I am missing smth, it'd be helpful if you could at least support your "yes"s and "a lot"s by something of value.
    #18     Dec 14, 2002
  9. maglia rosa

    maglia rosa Guest

    It seemed to me arbitrage was the theme of the thread...

    Regarding commissions, I know clearing firms charge floor traders about $0.80/contract and believe Interactive Brokers charges $1/contract for options trades. That's an $0.01 in terms of one option. I don't know how much lower of a commission you're looking for, but they seem (un)reasonably low to me, no matter what size you do.

    If you're looking to do just outright straddles, it might help spotting out public orders and take those off the book to your advantage (before the market makers will). You could do some synthetic straddles against public bids and offers, to minimize on giving up edge (it's like bob/ 'dreamer' said: think outside the box... :) )
    #19     Dec 14, 2002
  10. No sarcasm intended ...
    #20     Dec 14, 2002