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Strategies & Market Trends : Expirationless Options (XPOs)- The Next Big Thing -- Ignore unavailable to you. Want to Upgrade?

To: Win-Lose-Draw who wrote (22)	7/8/2005 12:22:53 PM
From: Tech Master	Read Replies (1) \| Respond to of 60

You're assuming that it will trade lock-step. I'm not convinced of that but again, time will tell. Expirationless options "theory" and what occurs in practice on exchange(s) will likely be different. Let the games begin.

To: Win-Lose-Draw who wrote (22)	7/8/2005 8:54:10 PM
From: VLD3	Read Replies (1) \| Respond to of 60

If this option moves in "lockstep", then the strike prices would be required to do so as well, otherwise arbitrage occurs...but... If the strike prices are in lockstep, then out-of-the-money strike prices would rapidly approach zero, giving enormous leverage with no time decay. If the call option price approaches zero as the strike price increases, sell an at-the-money, buy multiple out-of-the-money, and you get arbitrage if the stock price rises and no risk if the stock price falls (the long was paid by the proceeds of the short). Assume the ratio is 5:1 on the out-of-the-money to at-the-money, if the stock price rises, you make $5 for every $1 you lose on the short. You don't care if the stock price goes to zero since the long position cost you nothing to buy (the option price can't be less than zero, and you can't lose more than you paid, and you paid with the proceeds of the short). So it seems that a linear price function would automatically create arbitrage - don't think that your suggestion is possible in a transparent market like the PHLX is proposing backed and cleared by the OCC.