New invention for the derivatives market - How to profit of it?

thecoder said:
But I repeat: only CALL and FairPUT, and the underlying, are allowed in the market, the standard PUT is banned.
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saying like that is like saying: "Hey, you can't sell your bicycle here because i want to sell my bicycle."

This is a marketplace and we can bid/offer whatever tf we want. At the end of the day, it's the market participants who decide what the market price is. BSM is a rulebook not a strategy. If the market wants they can price calls more expensive than puts.

If you are convinced that current puts are constantly overvalued then the easiest thing for you is to keep on selling them. Trying to ban something is way over and above you that it's actually rediculous.

The fact that you didn't understand the arb trade between regular and yours just makes it worse.

Kevin Schmit said:
Edit: to be clear, if a fairput has the same price as a standard put, no one will buy the standard calls as they would get a better payout than the call with long stock and long the put. Similarly, just banning the standard puts on your exchange will do you no good, as people will just replicate the put with the call plus short stock, and arb that synthetic standard put against the fairput.
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(Y)
 
thecoder said:
I just wonder:
Why should one buy a Stock if one instead can get the synthetic version of it even for free (!) by Selling a Put and Buying a Call (with same params) ! :)

Same with the synthetic version of Short Stock!

Cf. table below with the Synthetics.

Here's also proof that it indeed is costless, ie. a free lunch! :) See column "Debit/Credit = 0" :
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what ???

You do realize that when stock price falls your synt (which you bought at 0) goes to negative ?
 
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tsfx said:
If you are convinced that current puts are constantly overvalued then the easiest thing for you is to keep on selling them. Trying to ban something is way over and above you that it's actually rediculous.
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I said the exact opposite: current Puts are undervalued (after the initial pricing, and especially at expiration).
The fact that you didn't understand the arb trade between regular and yours just makes it worse.
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I did my analysis and confirmed the objections, ie. the problems, in this posting of mine:
https://www.elitetrader.com/et/thre...w-to-profit-of-it.348911/page-21#post-5185830
So what else do you want, man! Just read the postings a little bit more carefully.
 
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thecoder hasn't given up! thecoder works hard to bring final & eternal justice to the world.
To the trading world that is :)

Soon in this theater... :-)
 
thecoder said:
I said the exact opposite: current Puts are undervalued (after the initial pricing, and especially at expiration).
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Yep, my typo. Regardless, just make everything the opposite. Point was, an Arb is when you have different price for the SAME product. You don't need math to figure that out. You clearly proposed a different value for an exisiting product. To make a market for it, someone must constantly take beating. You ?

thecoder said:
I did my analysis and confirmed the objections, ie. the problems, in this posting of mine:
https://www.elitetrader.com/et/thre...w-to-profit-of-it.348911/page-21#post-5185830
So what else do you want, man! Just read the postings a little bit more carefully.
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yep, i didn't see that.

Again, your title asks how to profit. The easiest way is to buy something you are convinced is undervalued and sell something that you are convinced is overvalued. You don't need to go more complicated than that. Market will surely let you know how right or wrong you are.
 
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