edamo, RE:<<gv...you missed a salient point in pal response to me...he didn't buy both sides...hence no two commissions,he sold put,cash in, went long call...cash out with OPM>>
Nope, didn't miss that point at all. He might have used OPM to buy the long call, yes, but he still used up available margin that is needed to back the short put. This available margin can be used to buy stock, as I suggested, or it could be used to back the short put, as PAL suggested. Again, the point remains the same--buying the stock has the same return on capital as shorting a put and buying a call, and the cost of trading is lower. All PAL did was give a CBOE trader some free money. |
