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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: John Vosilla who wrote (57300)	7/6/2006 12:24:16 PM
From: ChanceIs	Read Replies (1) \| Respond to of 306849

BZH options: At 11:58, Schwab is showing me: $44.75 for BZH equity, (penny spread) $4.60 bid for the Nov $45 call $4.20 bid for the Nov $45 put. So buy equity sell the call would require $44.75 less $4.60 or $40.15. This would be called selling a put synthetically. Alternatively, selling the put directly would yield $4.20. If the option was exercised against you, you would buy the stock at $45, but have the option premium, and end up long the stock with a cost basis of $45 less $4.20 or $40.80. So correct a difference of $40.80 less $40.15 or $0.65 which is roughly 15%. What to do?? Enter a closed/arbitrage, no risk position. Buy the put and sell the put. How do you do that??? Buy the put for $4.30 (ask), buy the stock for $44.75, and sell the call for $4.60. If the stock closes above $45, it will be called away at $45. You keep the call premium of $4.60 and a capital gain of $0.25 for $4.85 less the put premium of $4.30 for an $0.55 gain or about 1.2% (2.9% annually) in five months. If the stock closes below $45 you keep the call premium of $4.60, exercise the put at $50 for a $0.25 capital gain and lose the put premium. Same position as before. So there it is. 1.2% sitting there RISK FREE . 1.2% is nothing to write home about, but it is risk free. If you are unsure about what to do elsewhere and have some cash to invest, then it is a great move because it is RISK FREE . I love options. You should learn to do the same. Everyone should. Our markets would be much more liquid and stable if everyone participated. It is a patriotic thing to do. I am quite serious when I say that. Little old ladies can do better with option hedged positions in equities than money markets, and with little additional risk. Why does this BZH arbitrage opportunity exist??? I can only guess. Stuff happens. After a while, people like you, guided by Adam Smith's wonderful invisible hand notice and take a position, making the imbalance disappear and earning (quite deservedly) a buck in the process.

To: John Vosilla who wrote (57300)	7/6/2006 1:13:27 PM
From: Dave	Respond to of 306849

What you're probably seeing with the Option pricing is known as Put-Call Parity. It is defined as the following relationship: Long T-Bill + Long Call = Long Stock + Long Put Since the above two positions are equivalent, the calls are priced higher than puts by the interest earned on the cash value of the Long Stock position for the duration of the option. Hope this helps.

To: John Vosilla who wrote (57300)	7/6/2006 1:49:53 PM
From: shades	Read Replies (1) \| Respond to of 306849

Nationwide to raise rates 71% sptimes.com Another insurer asks for huge hike Nationwide, which already has stopped writing new policies in Florida, wants to raise its rates 71.4 percent in anticipation of hurricanes. By WILLIAM R. LEVESQUE, Times Staff Writer Published July 6, 2006 -------------------------------------------------------------------------------- Nationwide Insurance Co.'s Florida unit is asking state regulators today for an average 71.4-percent rate hike for homeowners coverage, joining a flood of insurers seeking double-digit increases in the face of an expected busy hurricane season. The request, if approved by the Florida Office of Insurance Regulation, would be effective Nov. 10. Public hearings, which are required on all rate hikes of more than 15 percent, will be scheduled. The rate increase would affect all of Nationwide's 240,000 Florida policyholders and comes on the heels of a 21 percent average rate hike last July. Last August, Nationwide said it wouldn't renew 25,000 homeowners policies and 4,800 mobile home policies. It has stopped writing new policies in Florida. "When you get right down to brass tacks, just as every individual needs to be ready for hurricane season, insurance companies have to be ready, too," said Joe Case, a spokesman for Nationwide, which is based in Columbus, Ohio. "The request reflects the true cost of doing business in Florida, where the threat of hurricanes is very real." Among other major insurers in Florida, State Farm sought a 70 percent increase in May and Allstate won approval in February for rate increases of up to 50 percent. Nationwide's latest rate request ranges from an average 2 percent rise in parts of Flagler County to as much as 99 percent in parts of Palm Beach County. Case said labor and building material costs have increased, as has the cost of reinsurance, which is coverage that insurance companies buy to limit their risk. "This is not about recouping past losses," Jeff Rommel, regional vice president of Nationwide's Florida operations, said in a statement. Florida Insurance Commissioner Kevin McCarty said he is "extremely concerned" about the request and that it would have to be justified. "Many of our state's residents have already experienced difficulty paying higher insurance premiums due to the dramatically higher rates charged by global reinsurers," McCarty said. Many insurers are either seeking permission to raise rates or dumping policies written in Florida, driving many policyholders to Citizens Property Insurance, the state-run insurer of last resort.