Put and call options with same expiration date. Where is catch?
Imagine, I bought call options and put options with same expiration, but strike price of call options is higher than price of put options.
I excersize them. Practically it means I buy stocks cheaper than sell.
Why I can't become a millionarie this way?
The answer is that options have thier own price, and price of options will "eat" my premium.
But...price of call option doesn't depend on price of put option. How it's self-regulated and where is a catch?
Regards, Roman Voznyuk
plenty of arbitrageurs out there trying to make a buck by buying calls at say 27.50 and buying puts at 30 ... if they succeed over a few days time, they have builtin 2.50 profit less the cost of their options and commissions.
naturally, some of these arbs are market makers and do not pay any commissions at all, so you, the small guy, are at a disadvantage.
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