Options Arbitrage

It's a box, Rosy.

 

right, long/short 2 synthetics. i didnt see only 2 strikes in the image example

 

A long box is a short outside strangle at x, y, a long inside strangle at x,y. The combo value terminates (expires) to the value of the strike differential.

lbox:

Short otm strangle at 90 and 110 strikes
Long itm strangle at 90 and 110 strikes "guts"
Shows strangle equivalence--IOW, why the guts is/are equal to otm

=

Long call & short put at 90 strike "D1 long synthetic"
Short call and long put at 110 strike "D1 short synthetic"
Shows natural to synthetic share equivalence

 

At the end of the day the only one making money is the brokerage house.

 

<$20K in a PM account to short 1000 of the SPY 10-wide box. 1000 is $1MM notional and returns $17K on rates (b4 comms). I'd go down and out.

Turd, it's an arbitrage.

"How can you sell the puts if you haven't bought the calls..!"

Pink Floyd