those risks seems very acceptable for the position. I use IB too, dont think it's likely they will do 3. I looked this trade over and over just couldnt see anything wrong with it. Atticus, are there any gotchas. Noticed you ninja posted quite a few times in between.
The demand for puts and the synthetic short drives these reversals. I have some info which I'll share tomorrow after the NYSE open.
Atticus, I am not following you..... In my Thinkorswim Analyze section it seems like you could slap on the Dec options, short the stock and you'd be down about 50 cents immediately, but at expiration you'd recover the 50 cents and gain an additional $3.60 or so..... which on a $86 stock is a 4.2% return or 13.4% annualized.... plus what you receive in interest on the short stock.....what am I missing here? Thanks! JCM2
Referring to the Sep reversal. You're better-off trading the Dec EFP; long Dec SSF/short shares. There is risk of losing the short as it's been tough to borrow. There is ample inventory through IB now, but no guarantees.
I put some of the Sept's on.... today's P&L shows a slight loss, but still seems like I am going to have $800 in my pocket come expiration.....23 days from now (i did 1,000 shrs)..... guess we'll see
Should've done the EFP as atticus suggest. My account is locked right now, cant trade anything due to IB's SMA(special memorandum account) requirement. :/ This is ridculus, I have a position of 20contract on the 85 reversal with a max unrealized loss before expiration under <10k, my excess liquidity is around 50k. Yet i cant place any trades because it would cause my SMA to go negative, and IB to auto liquidate my positions at eod. argg...
I came in short 200 of the Sep 75Ps from 63% vol, neutral delta with short spot and an F-load of gamma/dg. Also long the 85 reversal in size and small in the Sep, Oct and Dec EFP. Covered the 75P overwrite at a gain of 5 per unit short in spot. Reckless trade, but it worked out. Half of the hedge was short shares, half in the Sep 85P. The Sep EFP and reversal is still trading 20 cents over carry, certainly not worth risking the short being pulled. Dec is still trading at huge edge. I believe the discount is simply the result of a liquidity issue on sourcing the short. The report is history, so the availability should increase into this little rally in shares. Newguy -- IB is ridiculous on haircut on these locks. My first reversal was marked at 8k per lot.
IB is down to 0 shares of SHLD available for shorting again today. What a soap opera! Will we get closed out? Or will our hapless heroes hang on by the skin of their teeth and reap the rewards of their intrepid arb? Tune in tomorrow for the next exciting installment!
No win scenario. Short-interest seems to rise regardless of the stock's performance. I covered a portion today.