GM volatility skew!

MTE · Nov 27, 2008

Quote from Mercor:

Could you use CBOE GM single stock futures instead of NYSE?

Sure you can, but that's what everyone is thinking so to make the long story short there is no free lunch.

Daal · Nov 27, 2008

Quote from Mercor:

Could you use CBOE GM single stock futures instead of NYSE?

they tend to go to a discount when there are no shares to short

Benthecat · Nov 28, 2008

It's possible to short GM. Not all the time, but it is possible (@ IB)

dmo · Nov 28, 2008

A few months ago it seemed like they were giving away money on Sears' reversals - you could lock in over 20%. Sears shares were hard to borrow, but there were some available at IB. So I did a few reversals just to see what would go wrong.

Everything seemed perfect - until on a tip I dug deep into my account info on IB and found they were charging me about 35% for the borrowed stock! Chalk one up for the "no free lunch" crowd.

Benthecat · Nov 30, 2008

@dmo

Where in your IB statement could you see how much they charged for stock lending?

Thanks

dmo · Nov 30, 2008

Quote from Benthecat:

@dmo

Where in your IB statement could you see how much they charged for stock lending?

Thanks

It's described in this post http://www.elitetrader.com/vb/showt...highlight=mighty+sneaky+outfit+ib#post2057096 In fact, I highly recommend that you read through that thread, which chronicles the follies of a few of us "free lunch curious" folks who tried to take advantage of this seeming fool-proof mispricing and ended up getting shafted.

spindr0 · Nov 30, 2008

In fact, I highly recommend that you read through that thread, which chronicles the follies of a few of us "free lunch curious" folks who tried to take advantage of this seeming fool-proof mispricing and ended up getting shafted.

Thanks for chronicling your saga of short interest fees by IB (I read your link). As a former member of the "free lunch" crowd, I always wondered why those can't miss arbs never worked out as well as advertised.

In my new life, I carry a lot of short stock and have struggled to figure out the math behind the fees. Now I thnk I'll just lie back and enjoy the screwing.

Benthecat · Dec 1, 2008

@dmo

Thanks for the good link.