At the beginning you say this approach is practical to individual investors. Having read thru it feels the opposite. I believe nailing down the specifics and understanding the mechanics here deeply is super valuable for individual investors.
However, the scenarios you mention being able to use are impracticable .
The biggest challenge to these positions is execution, when you have a keyboard and a mouse and big, fast-moving bid-ask spreads. Even if your brokerage allows you to place orders for options and underlying on the ticket (hint: they almost never do) the execution you get is 3rd rate at best, and subject to completely destroying your arb by the pennies you suggest matter a ton.
Maybe that's the knowledge gap here - how can an individual *actually* realize these trades with current setups. Do we need to code some fast acting algo? Call in and get special service?
The tactics here without hedge fund level tools are opaque!
For #2 -- there is only execution of one option: either call or put. you are simply figuring out which is better for you based on an interest rate
For #1 & #3, I have executed this in my own personal accounts with 2 different household name retail brokers. I've set up the spread as either combo (+call -put), or for #3, set up the entire conversion in one trade. I called up the help desk and they guided me through the set up. The execution is not perfect and/or the spreads may be wider than calling for 250up market through a broker, but typically the spreads are widest through a retail broker for interest rates.
Thanks for the post, you mentioned that you could give some resources to help with the fundamental knowledge required to follow. I vote +1 on that!
anyone else have interest?
going to decide on whether it makes sense to point to resources or make stuff myself
Make it yourself, please.
Thank you for the post!
Thank you for the post🙌
Thanks for reading!
At the beginning you say this approach is practical to individual investors. Having read thru it feels the opposite. I believe nailing down the specifics and understanding the mechanics here deeply is super valuable for individual investors.
However, the scenarios you mention being able to use are impracticable .
The biggest challenge to these positions is execution, when you have a keyboard and a mouse and big, fast-moving bid-ask spreads. Even if your brokerage allows you to place orders for options and underlying on the ticket (hint: they almost never do) the execution you get is 3rd rate at best, and subject to completely destroying your arb by the pennies you suggest matter a ton.
Maybe that's the knowledge gap here - how can an individual *actually* realize these trades with current setups. Do we need to code some fast acting algo? Call in and get special service?
The tactics here without hedge fund level tools are opaque!
Thanks for reading and engaging.
For #2 -- there is only execution of one option: either call or put. you are simply figuring out which is better for you based on an interest rate
For #1 & #3, I have executed this in my own personal accounts with 2 different household name retail brokers. I've set up the spread as either combo (+call -put), or for #3, set up the entire conversion in one trade. I called up the help desk and they guided me through the set up. The execution is not perfect and/or the spreads may be wider than calling for 250up market through a broker, but typically the spreads are widest through a retail broker for interest rates.