ST Alpha - "The way two guys in this book did options makes me appreciate how much of an arbitrage situation that can be in the system." (Reading a Post)

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In response to "no, though i do tend to like lewis' stuff. and i never mess with options, all my trading is done with the long term in mind.....nm" by x

The way two guys in this book did options makes me appreciate how much of an arbitrage situation that can be in the system.

Posted by David (aka David) Feb 23 '11, 11:32

They picked some stock that had been riddled by media negativity. They realized it was priced at $30 but normally traded at $60. They made the determination that one of two things would happen. It would either fall under $5 or it would recover to its usual range. Just by buying the $3 options in this regard, they made a killing when the stock returned to normalcy. That's a genius play that holds much less risk than most market stuff.

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a lot of quant stuff is like that too. it's all about combing through mounds of data and exploiting some edge the market has missed....nm - x Feb 23, 11:36 2
- It's an interesting book. -- nm - Will Hunting Feb 23, 11:44 1
  - One thing i noticed is there didn't seem to be much approaching what I consider fiscal knowledge - Will Hunting Feb 23, 11:49

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The way two guys in this book did options makes me appreciate how much of an arbitrage situation that can be in the system.

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