GM option play
- Thread starter newguy05
- Start date
Ah your basis was the put/call IV is equal. Got it, thanks for the explanation. I think this is very similar to the SHLD situation where IB had fun with the borrowing rates, the only difference is there wasnt a pending bankruptcy.
Since gm is almost a binary play, this might still work:
sell 3x may 1C 0.88
buy 4x jun 3C 0.23 (or 5x for more hedge)
About 0.55 profit if bankruptcy. Start off delta neutral and long gamma, and long vega, but IV will most likely drop only if bankruptcy occurs.
may need to roll the may 1C to jun 1C if no news by expiration.
Since gm is almost a binary play, this might still work:
sell 3x may 1C 0.88
buy 4x jun 3C 0.23 (or 5x for more hedge)
About 0.55 profit if bankruptcy. Start off delta neutral and long gamma, and long vega, but IV will most likely drop only if bankruptcy occurs.
may need to roll the may 1C to jun 1C if no news by expiration.
Oh man what a great arbitrage!!!!!
Do the synthetic at $1.50 and immediately cover at $1.86. Got to see how many I can get in before this spread changes.
People can easily make such mistakes.
I know a MM who, early in his career, found a great play.
He bought calls about 10 cents under parity, exercised immediately, and sold long stock.
He did it again and again. Then he decided to recheck his numbers, and sure enough he was off by a buck and was paying 90 cents over and exercising.
Mark
P.S. It wasn't me