collecting premium for a risk free 2 digit return

Quote from parisd:

Hi,

I am not offering any solution but just trying to have your opinions about collecting risk free at least 10% a year using short futures versus Long cash or EFT
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Any better alternatives ??????

Thanks
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That return is peanuts.
Look for something that gives you at least 10% a day.
 
Quote from parisd:

Did you post 4692 posts like this one ?
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No.
If you want to know, read my 4692 posts and come back after you found out.
Never misery stuff like your 10% a year!
:p
 
Quote from bvam1:




However, on the bright side, futures sometimes trade above or below its fair value, giving you an opportunity to arb.



The market is efficient because an inefficiency has yet to emerge.
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:eek: :confused:
 
Quote from Circle:



I personally simply take a naked position in the futures and get out when the mispricings disappear, hopefully collect a few dimes in the process..
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naked position in the futs? great arb, lotsa great advice in this thread :eek:
 
Quote from parisd:


My last try:
what about a synthetic long index instead of the cash index:
[long ATM call option and a short put option] (instead of the long cash index) + short future.

NO. Put call parity. If you were able to lock in a synthetic for a better price who would take the other side? The market maker? Come on, lotsa dreaming in here.

Keeping few months that combination to collect premium from the future, total margin requirements are lower than [long cash and short future]
Could it allow to safely multiplicate the basic risk free interest of 5% ?

Again. No. You want better than short term treasuries, take some risk. You are wasting your time.
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"I noticed that too (calls are more expensive than puts) and tried on a saxobank simulated account (where we can adjust the strike price of the option with lot of precision) to create a slightly out of the money synthetic long spot gold using a call and a put that have exactly same cost so no net debit, but I dont know how if it will behave exactily as long spot. (Even if a synthetic was built with exactly ATM options when price move the options are not anymore at the money but it remain a synthetic long, hummm... does it make sense in my friday night English)"

Uh, you lost me.

And 10% a day, wow, you would be the richest man in the world in no time.
 
Paris' line of thinking <b>can</b> easily lead to a risk-free rate of return which is in fact, higher than money-market or short term paper.

Without putting any effort into it, I just found a contango spread which accomplishes this:

BUY Aug '06 Gold at 616.0 with intention to take delivery.

SELL Oct '06 Gold at 622.6 with intention to deliver.

You net 1.0714% in two months, which is about 6.5% annualized.

Not much over the 'normal' risk-free rate, but keep in mind two things:

A)Your taxes on this 6.5% yield are lower than they'd be on the 4.75% money market yield.

B) That's only the contango spread available <B>today</b>. Keep watching spot vs. forward gold, and you'll find many momentary opportunities for a risk-free rate north of 8% annualized... probably even north of 10%, at the right moment, on volatile days.
 
How can the following be done:
BUY Aug '06 Gold at 616.0 with intention to take delivery.
SELL Oct '06 Gold at 622.6 with intention to deliver

What happen between end of Aug and end of Oct '06

For the return I got it (622.6/616.0) and also found commodities that offer much more than 1.0714% in 2 months

Quote from Rearden Metal:

Paris' line of thinking <b>can</b> easily lead to a risk-free rate of return which is in fact, higher than money-market or short term paper.

Without putting any effort into it, I just found a contango spread which accomplishes this:

BUY Aug '06 Gold at 616.0 with intention to take delivery.

SELL Oct '06 Gold at 622.6 with intention to deliver.

You net 1.0714% in two months, which is about 6.5% annualized.

Not much over the 'normal' risk-free rate, but keep in mind two things:

A)Your taxes on this 6.5% yield are lower than they'd be on the 4.75% money market yield.

B) That's only the contango spread available <B>today</b>. Keep watching spot vs. forward gold, and you'll find many momentary opportunities for a risk-free rate north of 8% annualized... probably even north of 10%, at the right moment, on volatile days.
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bvam1

Was just trying to say that the net debit can be zero if you built the synthetic long using option slightly OTM (or slightly ITM, not sure right now).

Can it still be consider as a synthetic long, was the question?

Quote from bvam1:

"I noticed that too (calls are more expensive than puts) and tried on a saxobank simulated account (where we can adjust the strike price of the option with lot of precision) to create a slightly out of the money synthetic long spot gold using a call and a put that have exactly same cost so no net debit, but I dont know how if it will behave exactily as long spot. (Even if a synthetic was built with exactly ATM options when price move the options are not anymore at the money but it remain a synthetic long, hummm... does it make sense in my friday night English)"

Uh, you lost me.

And 10% a day, wow, you would be the richest man in the world in no time.
More...
 
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