GATrader, the puts don't have to trade at the same vol as the calls and rarely do. Most stocks have a premium on the put side by at least a 100 bp or so. As for the stock not being able to short, are you sure? I thought a lot of guys on ET were shorting the stock awhile back. Actually I just looked it up, there are about 4 million shares short so I think it is shortable.
Mav, it has been awhile since I read up on the basics. Yes, they don't have to trade exactly the same IV but the only differnce between the put/call should be the cost of carry on the stock + dividends if any. In addition, my background was in trading futures ag options so the cost of carry is' nt that much due to the margining of futures. however, I ran this trade longcall/short put/short stock and on a 5 lot it is sure $450 in 15 days. I am missing something and I am fairly confident it is not in the skew for it is it would fly in the face of put/call parity abritrage. I remember seeing this in kkd-krispy donuts months ago and that stock at that time was hard to borrow. Any other ideas? Riskarb,trajan,HD, anybody else
I have it as a 161 dollar winner in 15 days. Look at the May and June's, it's even more pronounced. Calls are a 72 vol and the puts are a 90 vol. I don't know if these are the actual bid ask spreads, they seem pretty tight for vol that high. Yes, there is put to call parity and mm's for the most part make a living trading that arb. That does not mean that option prices can't be out of whack. Many times they are although its hard to take advantage of it due to the wide spreads and wild swings in the stock. Think about this for a second. This stock moves like a bitch ok? I would love to see someone try to execute the calls and the puts and the stock simultaneously and get the reversal on. The stock has huge spreads and the vol is based on the stock price. So after the close you might see a certain vol and think that it's attractive, but that's because the stock price is not moving. LOL. What happens when you trade that in real time and you get filled and then you go to sell 500 shares of stock and it drops .50 in one tick leaving you with a -.25 edge. See what I am talking about? Try to put that spread on during the day when the stock is moving all over the place and you will see what I mean. Not to mention that those options spreads I would think would be pretty wide. Just my .02
At many shops TASR is on the "restricted" list. I am unable to locate it at my shop. 40% of the 9.3 million share float is currently short, as of March 8th readings . . . Hence, the SQUEEEEEEEZE!
Right, it's hard to borrow. Some brokers have it, some don't. There is almost always a way to get hard to borrow stock if you can shop your order.
Did you guys see that last month 8 million shares was short? Is that right? You are telling me that out of a 9 million share float, 8 of that 9 million was short? You have to be kidding me. I'm getting this from yahoo btw.
Mav's right that this thing is all over the place. It can jump .50 while you're keying in the order. Very exhilirating.
The conversion/rev market is all f/u with stocks with zero short inventory. The box markets will be priced correctly, but the reversals are another matter. It's all academic anyway, the market is so wide in TASR that the bidIV and askIV can be 1000bp wide. riskarb
There's an article (commentary) about TASR options at http://www.thestreet.com/_mktw/options/stevensmith/10152116.html. Some quotes: Smith also suggests that as ITM calls are exercised, there may be a runup of the stock due to people short the calls having to buy to deliver.
Thanks for the link Loufah. Patience is a virtue when it comes to this rocket. I bought the june70 puts (hopefully thats far enough out!) at an average of 8.90. Good luck