Rare arbitrage profit from call vs put prices: explain why not being taken?

Discussion in 'Options' started by Option Trader, Feb 8, 2010.

  1. zdreg

    zdreg

    reread both threads. you will see that your assertions of facts have been challenged and rebutted a number of times.
     
    #41     Feb 8, 2010
  2. 500 people saying the same thing means less to me than one person who can respond to my rebuttal.

    Did you talk to Locate Stock? Did you check the IB supply of CTIC?
    Did anyone provide an answer why institutional traders don't sell their longs buy the March calls, and sell the March puts?
     
    #42     Feb 8, 2010
  3. MTE

    MTE

    This whole thread is ridiculous. If you think this is an arb then go ahead and make the trade. If it works out then fine you will make a risk free profit and prove us all wrong. If it doesn't then you would learn a valuable lesson.
     
    #43     Feb 8, 2010
  4. You don't understand, I am afraid to place the trade, just like you! You all are saying "it can't be else it would have already been arbed, and I am also saying "but I can't understand what is missing.

    1. There is no dividend
    2. The opportunity should be taken even for non-arb purposes (i.e. by longs who sell their shares, buy the calls, and sell the puts).
    3. OR: What Locate Stock is saying it costs to borrow the stock on the street, if e.g. IB runs out of them.

    Some of you feel good about yourselves by dodging handling the questions I am posing head on.
     
    #44     Feb 8, 2010
  5. heech

    heech

    This topic is irritating enough to me that I actually checked the IB supply of CTIC. If you don't understand how IB handles share-borrowing (and specifically the costs associated with it).. you need to educate yourself. I told you 3 days ago there are numerous threads about this topic.

    Here's what IB's "short stock availability tool" currently shows for CTIC:

    Name Cell Therapeutics Inc
    Number of Lenders with Inventory 6
    Symbol @ Exchange CTIC @ NASDAQ
    ISIN Code US1509345039
    CUSIP 150934503
    Country United States
    Quantity
    Available 250'000 shares
    Current
    Indicative Rate -70.00


    The important number here is "current indicative rate". Here's IB's definition: (the rate at which dealers in the Securities Lending/Borrowing Market are willing to transact today).

    It means that you need to pay additional fees worth an annualized interest rate of 70% if you want to borrow these shares. And with IB, the current indicative rate changes on (at least) a daily basis.

    If you really believe LocateStock can give you something for (almost) free while IB charges 70% interest... well, hell, I don't have anything else to say. I'm drained on this topic.
     
    #45     Feb 8, 2010
  6. Although there have been a few other informative posts, this was the most educational to me about the % IB charges.

    Nonetheless: You can still easily buy the Feb 1 calls for $.10 (= median between bid & ask, and also = last price), and sell the puts for $.55, netting you $.45, while the stock is only $.36 below the strike price, giving you an arb of $.09 minus commissions.

    70% is about 6% per month, or about 2.5% till options expire, taking away about 1.75 cents, and leaving you with an arb of $.07 minus commissions.

    So there you have it!
     
    #46     Feb 8, 2010
  7. spindr0

    spindr0

    Seemingly couldn't or shouldn't?

    You could save everyone (including yourself) a lot of time if you check the borrow rate with IB. You might find that CTIC and a lot of other stocks have significantly greater borrow rates than 1/2 a cent per share.
     
    #47     Feb 8, 2010
  8. spindr0

    spindr0

    At this point, you should be mortgaging everything you have and arbing all the CTIC that you can eat.

    And who cares why and what institutional traders are doing with CTIC. It's not going to add a penny to your account value.
     
    #48     Feb 8, 2010
  9. spindr0

    spindr0

    If I may, I'd like to ask one of the adults here, what is LocateStock? I trade with IB and often carry a lot of short stock, at least a lot for me. Is LocateStock anything that I could, would, should use? Thx
     
    #49     Feb 8, 2010
  10. tomk96

    tomk96

    this thread is funny.
     
    #50     Feb 8, 2010