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The answer is "probably." Easy money doesn't usually just sit on the table for long. You found the Shld thread on the Options forum; it turned out the borrow rate was way higher than expected, and more than justified the spread against EFP's. But my best suggestion is to find a...

Very interesting Matador, thanks for posting that. Prior to Black Scholes, attempts at option pricing models all assumed the need for a "risk premium" - an input that estimated where prices would be at expiration. In other words, should the bias be on the upside or the downside? Nobody ever...

Try it small first just to see how they handle it. I wouldn't put it past any firm to try and squeeze out a little extra $$ by finding some way to include the weekend.

Missing from your analysis is your reason for believing the deal won't go through.

Okay, a new guy comes in and in his very first post anonymously hypes a commercial site. TraderZones where are you? Are you sleeping or what?

I think you're right about settle-to-settle Spin, at least that's the way IB does it. That's a good observation and for a very short-term play that could be a consideration. But since you can't even know exactly what your borrow costs are going to be - and it's pretty certain they'll wipe out...

FWIW, AMD made Audit Integrity's list of the 20 companies most likely to go bankrupt in the next year. http://www.auditintegrity.com/assets/files/newsroom/2009/AI%20Press%202009-0917%20Seeking%20alpha.pdf

Hey, sounds like my kinda market!

Right. He paid I think a quarter or so for that put/call combo, so if DRYS is at 7.50 at expiration, he loses whatever he paid for the combo.

As a MM, I want to post the lowest bid and highest offer (i.e. the widest bid/ask spread) I can get away with. If I can bid 3.00 and offer 4.00 on those 105 XYZ calls, and no other market maker does better than that, that's great for me. It's great because Joe Blow - whose brother heard from...

1. Sure. But by the same token, if it goes up to 7.50 you come out a loser with the option play, a winner if you buy the stock. 2. This is the one that has me worried for you. It's easy to forget that leverage works both ways.

Why not just buy the stock?

From the MM's vantage point, it's competition with other MM's that will force them to make tighter markets. Let's imagine what it was like before the electronic era - when markets were basically made by MM's in the pit. Say I'm the only MM for XYZ stock options. I'm asked for a market in...

Mech, bid/ask prices are not "determined." They just are what they are - the result of a lot of competition between buyers to buy and sellers to sell (tight bid/ask spread), or very little competition between buyers and between sellers (wide bid/ask spread). Take stock XYZ which has little...

Keep in mind that buying a deep in-the-money RUT 350 call is no different from buying RUT and buying a 350 put. And you'll find that the put is much more liquid. Using options, there are lots of ways to decrease your risk by giving up some upside potential. You've described one of them...

You need to have a thorough understanding of implied volatility and option pricing. I once created and posted a video explaining those in some detail, you can watch it for free at http://masteroptions.com/?p=3

You're right - for the reason you mentioned and a few others, OTM index puts are more valuable than equally OTM calls. That hasn't escaped the notice of the market, which prices OTM puts higher than equidistant OTM calls. At this moment, with the SPY at 107.10, the 100 puts are trading at...

Sounds like a great exercise, should be very instructive, kudos to your prof. However, the information you've given is very spotty. Rather than waste time guessing and going back and forth, why don't you give some details - the exact positions you're comparing (with puts alone and with puts...

You can look into the Commitment of Traders report, which may help. More directly, you can also look at the OVX, the Oil VIX, which is a volatility index based on options on USO. If you chart it against USO, you can get some ideas on their relationship.

Correct, short a call and long the underlying is otherwise known as a synthetic short put.