That's right. Pekelo got the arb before the computers. Only on ET.
Legging into an IC doesn't count.
Risk free iron condor
- Thread starter hurricane_sh
- Start date
That's right. Pekelo got the arb before the computers. Only on ET.
Legging into an IC doesn't count.
Well it wasn't an arb once you include transaction costs, but well done nonetheless.
Wouldn’t brokers still hold the full margin on that position of $500 per one lot?
Risk free doesn't exist... I'd like to see the details of any so-called risk free iron condor... so I can debunk it. My guess, any 'risk-free' IC is probably due to dividend pricing... and therefore not risk-free.
Let me explain something else regarding that Tesla March IC @Pekelo.
These are current midpoints:
IC = 4.90... which is the strike minus the butterfly... those are the same trades basically (forget about the half cent in interest... not interesting).
So... you might think that the butterfly is cheap at 10 cents, which is the same as saying the IC is expensive at 4.90...?
Then you basically have an idea about the volatility of Tesla... because the butterfly is nothing more than a reflection of this. If you think that the bfly should be higher, than you're saying that the IV should be lower.
So while it might seem cheap.. 10 cents for a possible 5 dollar payout... what are the odds of actually hitting that? The March straddle is 75 bucks... and you're saying Tesla will expire between 340.10 and 349.90... hopefully on 345...
You're right, it's low risk... but also low probability... and therefore what's the point?
(PS. when I say there's no risk-free... I mean that when most people see a risk-free opportunity, they are actually not aware of the risk due to a misunderstanding of the workings... of course there are risk-free things, but they will usually be arbitraged in seconds)
Let me explain something else regarding that Tesla March IC @Pekelo.
These are current midpoints:
IC = 4.90... which is the strike minus the butterfly... those are the same trades basically (forget about the half cent in interest... not interesting).
So... you might think that the butterfly is cheap at 10 cents, which is the same as saying the IC is expensive at 4.90...?
Then you basically have an idea about the volatility of Tesla... because the butterfly is nothing more than a reflection of this. If you think that the bfly should be higher, than you're saying that the IV should be lower.
So while it might seem cheap.. 10 cents for a possible 5 dollar payout... what are the odds of actually hitting that? The March straddle is 75 bucks... and you're saying Tesla will expire between 340.10 and 349.90... hopefully on 345...
You're right, it's low risk... but also low probability... and therefore what's the point?
(PS. when I say there's no risk-free... I mean that when most people see a risk-free opportunity, they are actually not aware of the risk due to a misunderstanding of the workings... of course there are risk-free things, but they will usually be arbitraged in seconds)
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Good analysis JackRab. However, if you have the ability to somewhat predict direction or magnitude or some legging in ability to put on a bunch of these sprinkled across the price spectrum ,then you got something going. You don't even have to wait for 6 months. 2 months later you will make a little but triple your $$.. TSLA gotta land somewhere in 2-6 months.. 
Hey, OP asked for a risk free thing, since there is no such a thing I gave him the next best thing, a low risk strategy. Now for the low probability part, you might want to check my thread out:
Iron Condor on Tesla:
https://www.elitetrader.com/et/threads/iron-condor-on-tsla.310322/
Started in mid-June when TSLA was at $355, expired 3 months later when TSLA was only 20 bucks higher, at $375. We are 2 weeks later and the price is back at $350. I even gave an explanation why I thought Tesla would go sideways, so maybe it wasn't such low probability, it was fundamental analysis...This was a risk 1 to gain 1 strategy. The IC mentioned here is risk 1 to gain 49, basically free...
The IC posted here still has a decent chance to get a fairly good return. Tesla's price will zig-zag, but as long as it returns to close to 345 in the next 6 months, it can be closed with decent profits.
I also like the idea of Mushinseeker, throwing a couple of similar low risk ICs across the price spectrum and hoping that 1 will get a big payoff.
Because it is a lottery ticket and high reward specially when you throw in a little fundamentals into the equation.
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Pekelo. if you stumble across 1-2 of this occasionally , it is a good thing.Now when you start "sprinkling" across price spectrum- then it can become a full blown trading structure.
I remember that thread- that was a nice one about layered entries,etc. Sprinkling across price spectrum (assuming you have legging in competency is a great way to systematically "harvest" those 1:49 bets... seriously.