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Strategies & Market Trends : Waiting for the big Kahuna

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To: GROUND ZERO™ who wrote (87374)	5/19/2009 7:58:45 PM
From: Real Man	Read Replies (1) of 94695

I've been flat for a little bit, except gold stuff. The rally went to the 200 MA target quickly, although I've been thinking of taking an arb position tomorrow that gives a huge profit in a month. Just can't figure out what's wrong with GM arbs that are supposed not to provide such opportunities. The put/call parity trade is normally risk free, as it is completely market neutral. Something to do with the cash -g- GM stock traded at $1.27, $1 calls traded at 27c, while $1 puts traded at 42c. This gives time premium of 42c to $1 puts and 0 to $1 calls. The put/call parity trade collects the difference between put and call time premiums by entering a risk-free arbitrage position (in this case, short puts, long calls, short stock). 42c on a $1.27 stock is not bad at all. -g- Message 25655746

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