SPY Dividend Plays

[raf_bcn]

No. Buying a put with stock before a Dividend and then holding until after would create a loss for the option/stock positions that you will get back with the Dividend. If you are long stock and short a DITM call, where the put has little or no value, you get to keep the dividend with no off-setting loss from the change in prices after the dividend. You end up with a buy-write with cost of carry and the risk similar to short the put.

Yes it is he same .I said to sell an itm put and buy stock.
FSU would exercise his call today, that is the same as buying the stock today.

 

[Robert Morse]

Yes it is he same .I said to sell an itm put and buy stock.

My mistake. I thought you wanted to buy stock+buy put.

Buy stock and sell ITM put is not a hedge. You would get the dividend on the stock and be at risk on both.

 

[Robert Morse]

FSU would exercise his call today, that is the same as buying the stock today.

His position would be hedged with an ITM call.

 

[raf_bcn]

And my position will be hedged with the stock.
Is the dividend arbitrage, exactly as FSU explained. I thought that all the market makers did it.
It is a good idea if you have low comissions.
It is posible to earn the dividend for free if your puts are not assigned the day before the ex dividend date.
But yes, it is important to sell a put deep itm, like the 250 that FSU proposed.

 

[raf_bcn]

ediiiitt. Big edit
Everywhere I wrote itm put i meant itm call. Obviously. Like FSU said.

I understand why you were confused . Robert Morse , sorry .

 

[Robert Morse]

Would you like to re-ask?

 

[FSU]

Raf, yes selling the call and buying stock would be essentially the same play, but easier to buy or sell the vertical and then exercise. You end up with the same position, but its easier to put on.

 

[elt894]

Most of these spreads are crossed on PHLX by MMs. Some hit the COB on CBOE from customer orders.

Thanks Robert. I am aware MM execute on PHLX due to the fee caps. What I was hoping to get at is whether it's possible for a customer to take one side of these trades. For example, does a MM trade with himself in two subaccounts or with another MM at an agreed up time? Or can two MMs agree on a trade and then report it without it ever hitting the COB?

You rarely see the MMs trading simple verticals, which was making me suspect they are pre-arranged somehow. For example, here's one with eight legs in different ratios:
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Here's another where they aren't even flagged as a combo: