Steve merely ment that TBH traded at a discount instead of the usual 9/16 - 7/8 Premium, so you could even trade on TBR bid and TBH ask, with barely any market value in the box. Also you can step in the quotes which works good in TBR, not so good in TBH making even more use of it.
Monty if you think it should adjust, trade it wherever you seea possibility. At least, arbs add liquidity.
For me it worked out fine in the meantime (see post 6207), as I found a premium of almost 1 for TBH too high.
Comparing the charts shows that the premium prevails often in neutral-to-bullish momentum, and turns to 0 or discount in bearish tide. Yesterday and today it was off for short time especially when TBR/TBH went south. SF mentioned it earlier already (posts as early as #5955).
This was in particular the case when the dow reverted its +50 this morning and the bovespa and TB got red the first time.
The TBH premium and advantages have been discussed for long, since the first time it was mentioned, along with the conversion offer. Yet the liquidity issue remains, incurring some costs and "slippage" on closing positions in then 12 or 13 stocks. For the options side, I also consider a tradeable underlying an advantage to some extent. It might draw volume to the TBH options side in the future.
But this is not true for now and future value of TBHs availability is difficult to estimate right now.
I do have concerns about TBHs liquidity, as TBH/TBR turnover ratios are diminishing again. From a more practical point, I found it somtimes more difficult to trade it, and get it executed inside market in comparison to TBR.
Christian |
