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You are ignoring the fact that the money you paid to buy the stock could be earning $3 in a risk free investment. That is the "cost to carry" which must be included in your analysis. When included you can see that the options are not mispriced. You could make the same $3 in a CD why bother...

Sorry, you are right it was not you who calculated the cost of carry. Anyway, I don't see how the $3 arb is real because the cost to carry the stock is $3. BTW. I think that your synthetic calculation omitted the cost of carry. Don

I don't understand how you can agree that the options are mis-priced. A couple of messages back you calculated the carry cost at 4.1%. If the options were mis-priced wouldn't your carry cost calculation be out of whack? 4.1% sounds pretty reasonable. What am I missing? Don

Strike-Putcredit=breakeven 75-10.8=64.2 So on the surface the original scenario looks like it has less risk, but if you add in the cost of carry both scenarios should be roughly equal (assuming no B/A slippage in the option pricing). Don

Oops, as other posters have suggested my break-even figure is wrong. My revised figure is $62.7 as Profitaker has already stated. Investment =-76.3+15.1+10.8=-50.4 At expiration Call =0, Put=-12.3, Stock=62.7 Value at expiration =+0-12.3+62.7=50.4 (equals investment above) Hence 62.7 is...

I would have guessed that IB prohibits you from drawing down margin requirements and therefore would not have let you buy the call. Am I misunderstanding something? Don

If Apple falls below $50.40 at expiration your paper loss will be the difference between $50 and the price of Apple stock. In addition you will be assigned more shares of Apple which you can sell immediately to minimize any further loss. If you like Apple at $50 maybe the above drawback does...

Because your shirt has a practical, useful purpose. Stocks have no practical purpose, it's just a piece of paper. You can't eat it, wear it, nor does it give shelter. Best you can do with a stock is find a greater fool. Don P.S. Again, stocks paying a significant dividend are excluded...

I'll sell you a 1% share of my car for 100 times par value with only a few caveats: You can't ride in it, you can't tell me what to do with it, and you can't share in any money I earn with it. However, you are free to sell another sucker your share. Okay it's not gambling, it's fraud:)...

Well it's either gambling or investing and my vote is gambling. I might be willing to call it investing, but my definition of investing is funding something that produces a beneficial product or service that justifies your profit. I don't see where my buying a stock on the secondary market...

I just remembered that IB doesn't pay interest on the first $10k and therefore depending on your total cash balance the total return can be a lot less than 4%. BTW, IB also does not pay interest on credit balances from the short sale of stocks. Have you been able to circumvent that drawback...

Are the AAA corps paying more than IB's normal cash interest rate? As I recall IB currently pays about 4%. Don

Thanks, craigatelite, I'll have to take another look at Muni's, but I am still leaning toward TIPS which yielded about 5.8% in the last year. With the now high energy prices I would think inflation continues for a while. Relative to higher yield bonds like Ford, one of the talking heads on TV...

Don't forget about the advantage of being able to margin bonds. If you don't care about margin than maybe CD's are okay. Don

Thanks, it worked. Looks pretty good, but I am having trouble with the date filter. It keeps telling me to enter in the YYYY/MM/DD format which I did, but it still complains. I'll have to call tech support. Do you know if there is a way to enter a CUSIP number? Don

Good, I'm happy to hear that IB has decent bond capability. Can you give me a clue how to access their scanner or how to enter a CUSIP number? Good point about their real time bond quotes and their commissions are dynamite, as usual (as I recall $1 per bond). Okay "lame" might have...

IB's bond capability is pretty lame. I don't even think they have a screener, at least I could not find one, and they only trade corporate bonds no treasuries, etc. Try Fidelity, investinginbonds.com, or even Yahoo for bond screeners. Ultimately your broker is probably the best source except...

I don't think there is much difference between the two in a rising interest rate environment. Of course TIPS are tradable in the secondary market and I bonds are not. So while TIPS pricing in the secondary market will fall if rates rise and vice versa, I bonds are not tradable at all. I...

I think I know what you are talking about, but I don't know what you mean by a "B label bond". Perhaps you are talking about a credit rating. Anyway it might be a good deal, but I'm more comfortable with listed and secured bonds. For example, Ford motor CR CO bonds maturing in about 1 yr...

True CD's have some pretty attractive rates, but for the same term generally bonds are a little higher especially if you consider the state tax advantage. Furthermore not all brokers offer CD's and those that do probably do not consider them marginable. Don