Have you seen risk free iron condor? The premium collected is more than the maximum risk.
Risk free iron condor
- Thread starter hurricane_sh
- Start date
There are risk free arbitrage opportunities in the market. They last microseconds before they're picked off by programs that have been written for the sole purpose of finding and exploiting those opportunities.
Even more important from your perspective, is transaction costs. What you're really asking is if there are iron condors where the premium collected minus your transaction costs is more than the maximum risk. Since your transaction costs are higher than all those trading program's transaction costs, they actually encounter a risk free transaction before you do. So they don't even have to be seconds faster than you, they just arbitrage it away before it becomes a risk free transaction for you. The more complex your multi-leg spread becomes, the higher your transaction costs and the more likely this transaction cost arbitrage is going to work to your disadvantage.
I did. It was a very long term like 18 months TSLA IC and the premium collected was 10.05 on a 10 bucks spread. After a while it adjusted...
Pekelo and cdcaveman bring up a good point. Whoever sold that to Pekelo was was getting a $10 loan for 18 months and paying only $.05 interest plus their transaction fees, that's a .3% interest rate!
Yeah, if the trade goes through. You can try similar ones today too. And yes, one can look at this as a cheap loan...
I wanted to sell the IC, so I would have got the credit.
But here is a very low risk trade with TSLA:
Sell 10 ctrs of the March IC 340/345/345/350 for $4.9
The max. loss is only $100(plus com. of $37), the BP effect is minimal (thus doesn't tie down your money), max. profit is $4900. Assuming TSLA will go mostly sideways in the next 6 months, you can close it with a nice timedecay anytime in a few months and the ROI (BP effect is only $137) will be huge.
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so Pekelo you are saying risk $10 (+ commish) and stand to make ~$220 if TSLA settles at 345 near expiration? or better yet in about 3 months, re-visit the position and stand to make about ~$30 (3x your debit) IF TSLA between $320 - $350 ?
I just loaded the legs and the market on that fly is 3.55 natural and mid mark at 4.77 which means you probably get it closer to $4 credit then you get cuffed closing it out...