3 Responses to “option arbitrage with different exchanges?”

1. Spock (rhp) says:

   February 5, 2010 at 8:45 pm

   what you propose is already being done by very large trading houses using computers with immense capital at their disposal.

   find something else.
   References :
2. Ted says:

   February 5, 2010 at 9:24 pm

   First, there isn’t going to be that much to arbitrage, since the dealers all put in the same Black-Scholes valuation formula into their computers.

   Second, the dealers are members of the exchanges, so they don’t go through brokers and pay commissions. If a difference does creep in the dealers will get it before it gets wide enough for you to show a profit after covering your commissions.

   Third, arbitrage is a business of small price differences. The only way anybody can make any money is by doing high volume. Unless you have the money to do 1000s of contracts at a time for 100,000s of shares, forget it. Of course, if you had this kind of money, you could buy your own exchange membership.
   References :
3. zman492 says:

   February 5, 2010 at 9:57 pm

   <<<if i wana arbitrage option in different exchanges(like nikkie, uk exchange) what broker should I choose?>>>

   The one that gives you the lowest expenses. That is likely to be Interactive Brokers. If you want specific capabilities, such as being able to direct an order to a particular exchange, be sure the brokerage you contact has that ability. instead of always use the NBBO.

   <<<is it possible to arbitrage option in US exchanges>>>

   Sure, as long as you are willing to accept tiny returns, usually
   less than the prevailing interest on Treasuries. Conversions using LEAPS often provide a positive return, though with current interest rates it is may be difficult to make a profit in today’s markets.

   <<<i have found only one exchange CBOE with option quotes.wht other exchanges list options?>>>

   AMEX
   BOX
   CBOE
   ISE
   NSDQ
   NYSE
   PHLX

   and for options on commodities and futures

   ONE
   PBOT
   CFE
   NYL

   <<<please let me know..what i meant to ask is how is it possible to arbitrage option with different exchange.?>>>

   I don’t really think you could make any money with interexchange arbitrage. You would competing against companies that have spent millions to have take advantage of any interexchange arbitrage that occurs.

   <<<so if your not a trading house and dont have big capital you cant arbitrage?>>

   Sure you can. The types of arbitrage you could do would be limited and you can’t make enough money doing it to be worth your while.

   —–

   Remember that risk and reward always go together. If you want an essentially risk-free arbitrage spread you will also have a spread that is essentially profit-free as well.

   You can control risks and keep them at reasonable levels with using arbitrage. Read books about options trading. Learn about delta neutral spreads and how to adjust them to remain delta neutral without assuming excessive gamma, theta or vega risk.
   References :
   http://www.investopedia.com/terms/n/nbbo.asp