The coder reached out to KS and myself and wanted us to reiterate and prove how his "FairPuts" simply wouldn't work in the current market with PCP and synthetics. For his sake and ET readers I'd like to put this terrible idea to bed and stop wasting everyone's time. This was my response: "It's pretty simple. At the same price, no one would ever buy the BSM put or the BSM call, because the FairPut has a far superior payout than both. As soon you introduced the FairPut, the algos would be buying as many FairPuts and selling as many BSM puts and BSM calls until the theoretical payouts were equal. A synthetic "FairCall" (long 1 spot + 1 long FairPut) would have a far superior payout than a regular BSM call at the same price. So my arb HFT program would buy as many synthetic "FairCalls" and sell as many regular BSM calls until they had equal payouts, instantaneously. You would have to get rid of BSM puts and calls forever in order for the FairPuts to exist. It would be impossible for them to co-exist side-by-side. Your FairPuts would be arbitraged within seconds until they were mirror replications of the more established and liquid BSM puts and calls. That would completely defeat the purpose of your FairPuts. You would need people to completely abandon both BSM puts and calls for your FairPuts to succeed, which will never happen. You seem like an extremely hard worker and exhibit strange but relentless curiosity. You should refocus your energy on learning how to actually trade and make money, which would be a much more efficient and productive use of your time. Trying to reinvent the wheel and convince academics and traders to change or alter something so well established and fully ingrained in the industry, and that has been around for almost 50 years, is going to be both a hopeless endeavor and a complete waste of your time and energy."
Today (Saturday) I had a very fruitful private discussion with VolSkewTrader regarding FairPut. The above posting of him was just his initial reply to my inquiry. Anybody seriously interested in reading the other postings of that IMO very interesting private discussion (so far spanning over 2 pages or so), or even wanting to make own constructive postings/contributions, can ask me or him to be added to the list of participants of that private discussion. .
There goes Vanz, basically saying through emoticons that he is happy to be bashing his head against a wall. I don't get that. Like there. I think I just punched you in face and expect you to be ok about it with a thumbs up.
Now that's a babe magnet if there ever was one. ♫ ♬... I wanna be a ree_aal man". ♫ ♬ Queued it up for ya Coder... These real men... they make it hard for the rest of us. ET HOF:
I KNEW it! Magic pencils don't come from any place other than Mother Russia! I know this because I saw a pic of a bare-chested Putin riding a unicorn! Was too good to be true. You commie Bastard! P.S. @thecoder It was a song called Macho Man by the FairVillagePeople. Surely you have heard of them. So sing it in your head, and think of dancing animated bananas