Help with a Brain Fart Combo Question

[UVXY20]

Ok, Let's say I short a stock at the last close on Friday and get that price, $288.50. And I simultaneously sold a one week OTM put at a 287.50 and bought a one week ITM call at 287.50 for a combined premium credit of $450.

Now if the stock closes below the 287.50 strike, I get an extra $100, right, as the short put when it expires it will take away (sell) my short stock at $287.50.

And if the strike closes above the strike, my long call kicks, in and the short is bought back for a gain of $100.

Thus my gain here is $550, no matter what the stock does.

Can this possibly be right? If not, where have I gone wrong?

 

[2rosy]

You're only looking at the gains. What about the loss?

 

[Robert Morse]

Short Stock + Short Put + Long Call on the same strike and expiration is a reversal. After you put it on, if short term, your only risk is pin risk. Your expenses are borrow costs and any possible dividends.

 

[cesfx]

Ok, Let's say I short a stock at the last close on Friday and get that price, $288.50. And I simultaneously sold a one week OTM put at a 287.50 and bought a one week ITM call at 287.50 for a combined premium credit of $450.

Now if the stock closes below the 287.50 strike, I get an extra $100, right, as the short put when it expires it will take away (sell) my short stock at $287.50.

And if the strike closes above the strike, my long call kicks, in and the short is bought back for a gain of $100.

Thus my gain here is $550, no matter what the stock does.

Can this possibly be right? If not, where have I gone wrong?

How can you get a credit for selling an otm put and buying an itm call?

 

[schizo]

I simultaneously sold a one week OTM put at a 287.50 and bought a one week ITM call at 287.50 for a combined premium credit of $450.

You sold OTM and bought ITM, and yet still collected $450 premium? Shouldn't it be other way around?

Edit: I see @cesfx asking the same question. Didn't see it before posting mine.

 

[cesfx]

And I think that even if you see an arb on conversions/reversals, there is probably something going on like a dividend, or some borrowing fees...

 

[UVXY20]

Correction:
Stock at 288.5. 287.5 Call at 14.80/15.30. 287.5 Put at 19.10/20.10.
ITM call long
OTM put short

 

[newwurldmn]

without the ticker this is a waste of everyone's time. they will spend hours speculating because you couldn't write three letters.

If you don't want to share the ticker then figure out the arb situation yourself.

 

[ajacobson]

@newwurldmn is spot on. Something is missing or the data is wrong or stale. The ITM call is cheaper than the OTM put. Corporate action, monster dividend/htb - but that does explain the call or just fiction.

 

[taowave]

And quite possibly one letter

without the ticker this is a waste of everyone's time. they will spend hours speculating because you couldn't write three letters.

If you don't want to share the ticker then figure out the arb situation yourself.