CIT Butterfly

E

erol

I'm on TOS and looking at a CIT butterfly for a 0.02 credit

this is a DEC 2 - 1.5 - 1 butterfly


I'm assuming this is too good to be true. What am I missing excluding commissions?

The IV is insane on these options.
 
ok spin, i didn't think about that thanks.

pardon my ignorance, but if the stock is hard to borrow, how does that affect the put prices in such a way that makes them sell for a credit?
 
Quote from erol:

ok spin, i didn't think about that thanks.

pardon my ignorance, but if the stock is hard to borrow, how does that affect the put prices in such a way that makes them sell for a credit?
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What ignorance? You cited a butterfly for a credit. The only risk would be if done for a debit.

The "I want your kidney" borrow charges only apply to short stock.
 
i read in a TOS article that sometimes we think we've found a deal but really there's a dividend or interest play or something that's priced in that most people arn't accounting for that the market has...

so I figure the butterfly has to have something hidden.

My commission structure precludes me from obtaining the butterfly for a credit (assuming I could get filled at those prices).

Actually, it was going for 0.05 yesterday too
 
Quote from erol:

i read in a TOS article that sometimes we think we've found a deal but really there's a dividend or interest play or something that's priced in that most people arn't accounting for that the market has... so I figure the butterfly has to have something hidden.
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There are no free lunches so the TOS article is dead on.

I won't swear that there's no possible hidden catch in the 1/1.50/2 put butterfly but I can't think of one. Ignoring the credit, the spread has a $ of risk and a $ of reward outside the strikes. That's a given. But even if there is something hidden, since you're long two puts for each two short, no matter what they stick you with, you have the right to stick it to someone else, no matter what the adjustment.

If someone sees it differently, feel free to fill in the missing puzzle piece.
 
Quote from spindr0:

There are no free lunches so the TOS article is dead on.

I won't swear that there's no possible hidden catch in the 1/1.50/2 put butterfly but I can't think of one. Ignoring the credit, the spread has a $ of risk and a $ of reward outside the strikes. That's a given. But even if there is something hidden, since you're long two puts for each two short, no matter what they stick you with, you have the right to stick it to someone else, no matter what the adjustment.

If someone sees it differently, feel free to fill in the missing puzzle piece.
More...

lol

thanks spin!
 
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