|
PureBytes Links
Trading Reference Links
|
Dividend arb is still a very common practice on the option floors. Essentially
the arb arises from the difference between the X amount which is still a discrete
amount i.e.. 1/8 3/16 1/4, etc. versus the dividend which is actually in
decimals. So you buy the deep option, exercise and sell it out. You need very
low transaction costs to make it work since trading in 1/16 became common.
JAC115@xxxxxxx wrote:
> Re your dividend strategy observation....if my memory serves me correctly, the
> formerly huge Japanese banks executed this strategy like clock-work in the mid
> to late 80's. You may want to look back at these cases.
>
> By the way, at that time, some of us perceived that this type of trading and
> corresponding positioning caused 'market volatility'....once again, everything
> is relative.
>
|