HOLLYWOOD STOCK EXCHANGE
THE ENTERTAINMENT MARKET
THE ENTERTAINMENT MARKET
I disagree, it IS 100% arbitrage....(Dorfman et al.)
...in that the trade sequence delivers 100% risk-free profit. If you purchase one share of Change-Up, purchase one put option of Change-Up, and short one call option of Change-Up, there is literally no opening weekend gross that would NOT return an overall profit. That is, if you define "arbitrage" as the practice of making a trade or trades that return(s) a risk-free profit. In this case, if you took all three positions as stated above, there is a completely risk-free expectation of profit. Even considering commission, there is NO OPENING WEEKEND GROSS that does NOT return a profit on the above trade sequence. Dorfman, if you can find ONE "price" (i.e., an opening weekend number) for Change-Up whereby I would lose money, please give me that price, and show your work =) Yeah, if Change-Up somehow impossibly and simultaneously opened below $19, above $26 AND between $22-$25 I would lose money, as your example suggests. But I can guarantee you 100% that I will make money on the above trade this weekend no matter what Change-Up opens at.
Arbitrage? Aug 01, 19:20
Star Bonds can be arbed. Aug 01, 20:29
I think my example is pure arbitrage -- 100% probability of making a profit doing this trade sequence with derivatives.... Aug 01, 20:46
If i Learned correctly.... Definitely not Pure Arbitrage Aug 03, 17:04
Not my understanding Aug 03, 23:16
yeah its not ARB unless its already made more money than what the stock or bond is trading at {nm} Aug 04, 07:30
I disagree, it IS 100% arbitrage....(Dorfman et al.) Aug 04, 21:25
It's a "Convergence Trade"... i.e., arbitrage Aug 04, 21:36
No, a convergance trade only involves 2 assets Aug 04, 23:04
alfpaul -- convergence involves two POSITIONS, not two ASSETS - nm Aug 09, 20:31
I see your point Aug 04, 23:10