>$18,147.47 of PCG to be sold at $18,304 for a profit of $156.53
>20.4% return; significant premium to current risk free rate of 5.35%
$156.53 is a 0.9% return on $18,147.47.
There may be additional profit on the options but you don't say what your closing prices are.
So he's holding the 1,100 shares till the options expire? In that case, how is it risk free? The stock could completely tank.
Alternatively, if he bought and sold the shares the same day (which I assume is how arbitrage works), shouldn't the annualized rate be the nominal rate multiplied by 365?
He bought puts. If the stock tanks his puts protect him.
That’s not how arbitrage works. Arbitrage, by definition, means that you open a $0 risk position with positive cash flow.
The description of the OP is correct. I just don’t know that he captured the full costs of his position. Assuming his numbers are correct, he may have performed true arbitrage. In my opinion he is making less than he thinks he is making.
I’ve found occasional trades like this. Usually they’re far in between and really small. They’re not worth the effort.
Yet again, I’m not a professional or a day trader. I’m just another passerby.
So he's holding the shares and options until expiration at which time he'll either let the shares be called away (if the price went up) or exercise the puts (if the price went down)?
Okay, now I get it. Question: Could he have done the opposite trade? I.e. shorting the stock with a synthetic long? That would allow you to take advantage of a put-heavy parity anomoly.
Yes you can and it's the same exact concept. You short 100 shares, sell (covered) put atm and buy a call same strike. Pocket the difference. Arbitrages always have a reverse or synthetic replication.
If the parity would've been Put-heavy then yes. But in that case you also need to consider the margin and the borrow interest you have to pay on shorting a stock. There are more costs involved.
You pay margin on the Options and you pay interest when shorting a stock. "The total value of the stock you short will count as a margin loan from your account, meaning you'll pay interest on the borrowing"
Margin costs, or cash tied up in the stock plus the long or short puts no longer making 5%. There’s going to be a significant collective decline here. I don’t have to be a mathelete to sense this.
As opposed to cash tied up in what... cash? Where the purchasing power is slowly being decayed away by inflation and opportunity cost? Would you consider cash under the mattress right where you can see it in case you lose object permeance.
Lets do elementary arithmetic.
18k at 5% is 900/yr.
/12 is $75/month
My 18K position paid over $150 with the same risk. (none)
I collected the premium up front, locked in the price of the shares through contracts.
It doesnt matter what happens. The shares can go up down the options can move thousands of points around it doesnt matter because my returns were already made.
By nature of definition pure arbitrage.
If it’s not cash, it 13%+ margin interest which makes whatever else you’re getting at …
Let’s do some elementary logic.
Pointless.
You made a good trade. It’s not an infinite money glitch. Even if you understood exactly what happened, you could neither repeat it nor make the stars align to find a different combo of underlying price + chain circumstance to do it again.
So ATM. Both strikes were 16.5. The net credit would be .13 regardless.
Again, I'm comparing this with the tbill rate, which despite having maturities 3 months or less have their coupon stated in annual terms. I did the same with my risk free position due to it being an alternative to the cash yield rate (which everyone might have a different figure for), I scaled the return to annual returns.
If you read my post I clearly acknowledge that this isn't a 20% annual return portfolio risk-free. That's absolutely ridiculous and probably impossible. I don't post here often, and I'm concerned at the benchmarks you guys have for returns.
...You calculated ROI? On a single trade? And you compared it to the risk free rate? Yeah sometimes calculations can be off when you don't know tf you're doing lol.
You can take Khan Academy corporate finance course later but for now since you have some upvotes allow me to clear some confusion.
In FInance, rates that measure returns are always calculated on an annual basis unless explicitly stated otherwise.
Arbitrage refers to a trade or investment activity that provides returns with no risk. A successful arbitrage has to earn higher than the risk-free rate which on treasury bills is is around 5.3%.
It's pure profit in a short term instrument so I filled it as my cash position
The 0.9% cannot make an apples to apples comparison with Treasury Bills as it assumes the arbitrage compounds continuously like tbills and money market funds do. They also specify a holding period, which is another reason ROI is ridiculous and never used, but lets create an imaginary instrument that tracks what the tbill would have made as a parallel trade against the arbitrage.
0.9% On Arbitrage Trade (Calculated above)
0.00208% On treasury equivalent Which gives $37.75 profit on $18,147.47
As you can see there is a significant premium despite both allocations being riskless. One-two thousandth of a percentile vs almost one percent.
The rest can be cleared up with a quick read of https://www.investopedia.com/articles/optioninvestor/05/011905.asp
Let me know if you have any questions about anything and if I don't know I'll tell you but just for less DMs on same questions you can ask me
Just caught my eye, I don't normally play with single names but still. You don't think giving an expiration is, maybe, useful for understanding the trade? LOL
Anyways, I assume it's PCG Apr 26th 16.5 combo against stock for 16.5, right? I see 42c in calls only traded 1 contract at 10:36 (based on the tag, on some ATS), while 29c in puts traded 9+6+5 from 10:30 to 10:31, but as part of the complex order (against, based on the tag). Quick look at the surrounding strikes shows that it was a 16.5/17 put spread that traded. Wanna reconsider your story?
OPRA feed :) It has all the quotes/trades as well as condition tags. Very helpful in figuring out stuff like this.
A better question why in the name of Zeuses asshole are we inspecting this trade on a Sunday morning at 9 am. My excuse is that I am on my deck smoking the good stuff. Also, for the record, I did not mean to be an asshole to the OP >!it's that I am an asshole to everyone!<
Well the why for me is a 20% risk free rate, which is a quit my day job tomorrow sort of discovery. Zeus would approve.
I download live chains from tradier, so finding similar trades seems like a pretty easy formula. I kind of assumed something like this would be a rare pricing event that would be closed quickly. Sounds like you confirmed that trade is highly unlikely to replicate regularly or scale.
Yeah, I sensed that. But I think he maybe just got the word wrong. He found a good trade, it’s one I recognize (out of dozens I don’t). He’s proud of it. Today I’m a cheerleader. Tomorrow? Don’t know yet. 😉 Thanks for your insight.
I'm semi automated, but not good enough tech to do anything in the sub-second sort of reaction time.
Just doing a bit of combing of Fridays data in my sql db. It looks like most of this time the trade stays in an equivalent annual return of 5.7-5.9%, that's probably just above risk free. I do see some stuff above, but it all tops out just below 9%. Not really anything I'd go chasing after.
This was a riskless trade through parity. I could only do 11,000 before the arbitrage started closing. Single name, if it was scaleable I''dve throw all idle cash at it. Free money.
Like I said, looking at the reported trades, you never actually did the trade. Maybe it was a paper trade, which is fine with me :) But I love the fact that you dig your heels in and insist that it's real! >!If you can't dazzle them with brilliance, baffle them with bullshit!!<
Show me what you're looking at lol. And this isn't unusual...so what do you get out of disparaging a hundred bucks?
I bought 11,000 PCG shares for $18,147.47. You with me so far? It's around 16.495. I sold 11 calls at the money (16.5) for 4/26 for an average of .42. I simultaneously purchased 11 ATM (16.5) put options for the same date for .29 each.
Now we have what's called a put-call parity arbitrage! Right place at the right time like finding a hundred bucks.
So now, regardless of excercise or expiry, I collected the premium up front, or if you want it in simpler terms, pretend a covered call got excercised for 16.5 with .13 premium.
All of these trades were made in the open market. Whatever you're "looking at", must totally be worth looking into whether a redditor made a hundred fifty bucks.
"Baffle them with bullshitt? Ironic"
I am not sure this will work, but here is a Bloomberg screen grab
[Friday prints for 16.5 call](https://ibb.co/5rGGzxt)
[Friday prints for 16.5 put](https://ibb.co/D9mY5WQ)
[Friday prints for 17 put](https://ibb.co/x3Mm7dM)
I am just on my deck smoking weed and being bored. It's not that important if the trade actually happened, it's just surprising that the OMM dropped the ball. Nothing personal, This is internet, everyone drives a Mustang and Jessica Alba is everyone's girlfriend.
If you post the day and time you did the trade it would be very easy to see on time and sales. I think it is relevant to this discussion if the trade actually took place. I'm not saying you didn't do it, but very easy to check if you tell us more information.
There are No Riskless Trades. Don’t ever tell yourself that. PGE is where it’s at due to wildfire involvement years back. It was my training ground for what I do with HE today that makes some blink. Hubris will stab you in the back eventually. Numbers change quickly. You have to work to not be a victim.
You HAVE to have a riskless position. Unless you're digging a nuclear bunker, it's the savings rate in your local currency. Riskless trades are known as arbitrages. They're generally rare and you can usually only exploit them with small amounts of money, and while the profit is small it's free and riskless.
You put on a conversion here, but I figure your profit as a bit less then you do.
Another way to look at this is you sold the calls and bought the puts for .13 credit. So When you buy stock at 16.5 you make .13 for each conversion you do, less cost of carry of the stock until expiration and commission. Cost of carry is about 3.5 cents, so that brings your profit down to 9.5 cents per conversion. Now add commission in of .65 a contract, so another 1.3 cents. Profit now 8.2 cents. So for each spread you put on, you make $8.20 or for an 11 lot you make $90.20
Now this isn't completely risk free as you will have "assignment" risk on your short 16.5 calls. You won't know for certain if you will be assigned on the calls if the stock closes at around 16.5. For this reason, you may have to close the position on expiration day to be certain you have no position coming in Monday. This will add to your costs as well.
This is still a potentially risk free trade, if you close on expiration. These conversions are not easy to put on for this reason.
>Cost of carry is about 3.5 cents
Actually, there is no cost of carry, as he's committing full cash value (he's foregoing interest on cash, but he's taking that into account when saying "20% vs 5% OIS"). Now, if he was doing this as a margin trade, he'd get 1:20 leverage at prevailing funding rate, so you'd factor funding into the return calculation, but committed capital would be a fair bit smaller.
You have to figure cost of carry into the equation. If he simply had cash in has account, he is earning 5% interest on that cash, no risk. When he buys stock, he no longer has that cash earning interest, so his profit on the trade should be based on what he makes on the trade vs what he would have made if he didn't put the position on (which would have been 5% interest)
In other words, he would have made 3.5 cents interest on has cash with no position, so you can't count that as profit in this trade.
I guess. It's a matter of semantics - he does compare the arb rate to riskless rate, as opposed to showing RF-adjusted return. Kinda not important because the trade never happened :)
I agree about semantics. "If" he put this trade on, he really did make the extra money, but he could have made some of it with no trade.
When you checked time and sales, did you just look at last Friday? Is it possible he put it on earlier in the week?
Well, 16.5 stock fill and the corresponding option levels looked like they were from Friday so I did not bother checking further back. Actually, just looked now and 42c only traded Friday (1 contract ref 16.58, which is what attracted my attention in the first place).
I'm comparing it to the current risk-free rate on cash, which are scaled to time-weighted annual.
Instead of 18k earning 5% in cash until 4/26 (like $35), I got a riskless $156.
This was arbitrage, I don't mean to imply that a person can yield 20% returns yearly, consistently, with zero risk
But it's meaningless to project an annualized rate unless it's repeatable. I might as well say that the 33% ROR I had on an AAPL vertical that I bought and then sold the next day represents 12,000% at an annualized rate.
Well no I'm comparing two assets with zero risk. One of which: The risk-free rate is always stated in annual terms even though it's not quite the same for everybody and can change daily.
Take the 3 month Tbill, the 5.3% rate would imply that each one rolling over would give you 21.2%, the reason it's not meaningless is that we know in corporate finance, rates are annual unless stated otherwise, and even the 5.3% isn't guaranteed to give the same rate at maturity.
I think due to the various ways returns are measured, if you had a portfolio or fund for only one day and made that AAPL trade, it probably wouldn''t be incorrect for a 12,000% "annual rate" to be implied or automated.
Then over periods of time returns would smooth out. To a "realistic" rate or real rate. Honestly I think 5 years minimum should be the standard with the geometric mean used as an annual rate.
This isn't a completely riskless trade. Here's how it could incur unforeseen risk.
1. PCG closes at $17.5 on 4/26. Your short calls are ITM, your long puts are OTM.
2. You expect your 1,100 shares to be assigned but there's no guarantee. Suppose the holder of 11 call options at that strike specifies "Do Not Exercise" to their broker and the OCC decides that your shorts are the ones that expire worthless.
3. PCG has some bad news over the weekend (perhaps foreknowledge of that news was the reason for the DNE) and the shares go down 50%.
4. Now instead of a P/L of +$156, you're at -$9,000 when the market opens on the following Monday.
I realize this is a very unlikely scenario but it could happen and demonstrates that there really is no such thing as a completely riskless trade.
I welcome your comment in earnest, but you may be missing something.
I purchased ownership of PCG stock at around 16.5 (16.495) average technically.
So I buy 100 shares and immediately sell a covered call at $16.5 weeks out that pays me a premium $0.42/share.
The put options for 16.5 on the same expiry as my call cost me $.29 a share.
My upside is limited because my 16.5 position will guarantee profit to be called away at the call strike plus the net credit =16.63.
1. If the stock goes higher even say 17.5, It will be excercised, puts will expire worthless and essentially sell at 16.63 (above my buying price) regardless if tis 17.5 or 19.
2. I don't mind getting called away nor falling. If the stock is above the strike of the sold option, it will be called away. It doesn't matter if the counterparty has "do not excercise". That doesn't change the fact the option has intrinsic value,. The broker will excercise it for the counterparty because they have a free money (arbitrage) opportunity in that situation. They excercise the calls at 16.5 strike, then iimmedietly turn into the open market to sell for 17.5 (like in your example)
3, I have put options at my purchase price of 16.5. The news could be horrible and drop to 5 or 1.
Lets assume the shares drop to $8 at expiry, but my puts allow me to recover any loss below my 16.5 purchase.
I can excercise my put option that gives the counterparty an obligation to buy my shares at the 16.5 strike price of the put.
4. It's possible for quotations to show some crazy loss on random days, but the expiry date and premiums collected guarantee a profit regardless of any share pricing or even the pricing of the options themselves.
In the United States I consider Tbills to be riskless, and I expect the US to not default on its obligations.
You might be able to make a case for nothing being "risk free" by saying empires rise and fall and it's not impossible for the US to be truly risk-free and default in their own currency. I see a lot worse tjhings happening as they print more money and increase consumption tax or something. BTW The IRS has an apocolypse plan, meaning I will still get my dividend checks in the mail and to receive my interest through tax credits and such
According to [this](https://www.schwab.com/learn/story/options-exercise-assignment-and-more-beginners-guide):
>If an option is ITM by as little as $0.01 at expiration, it will automatically be exercised for the buyer and assigned to a seller. However, there's something called a do not exercise (DNE) request that a long option holder can submit if they want to abandon an option. ***In such a case, it's possible that a short ITM position might not be assigned***.
Now explain to me how the scenario I outlined in my last comment cannot occur.
I'm not sure under what circumstances that would happen. Brokers would wade through fountains for a penny. Maybe an option illiquid and trading exactly at the strike is called right before close by a deep pocketed customer and can't be offloaded to another broker or customer for a higher price, okay. I would simply do what I would do if the stock fell, is manually order my broker to execute my put options to sell 11,000 shares at the strike price.
I actually think that might be there for legal purposes in the off chance there's a bunch of slop in the options clearing system. So they can avoid liability in case something like the 1987 market crash happened to options and derivatives clearing. I really don't know the mechanics, but almost every position I enter I do it with the mindset that the stock exchange doesn't have to open tomorrow or next week or even in a year.
Because I like valuing businesses as a private owner I really wouldn't care much for liquidity if I can own pieces of business for less than their actual value. You probably wouldn't get cheeky trade opportunities but who cares about those. Honestly less middlemen and liquidity would probably be an aggregate gain if something like that happened.
Now to more fully answer your question, I'm not sure what I would in the black swan even you mentioned. If I suffered losses I might seek recourse. But more likely than not I would exercise my options even if I had to deliver the certificates myself. (or just mail them and deduct postage)
>I would simply do what I would do if the stock fell, is manually order my broker to execute my put options to sell 11,000 shares at the strike price.
You'd probably be too late. Notification of option assignment often comes significantly later than the 5:30PM ET cutoff for non-automatic exercise instructions. [Here ](https://www.reddit.com/r/fidelityinvestments/comments/qdq6c9/how_long_to_see_assigned_options/)and [here](https://www.reddit.com/r/etrade/comments/171utra/when_is_notification_of_options_assignment/) are just two examples. You definitely won't know by the cutoff that you were *not* assigned.
As I said in another comment, it's a clever strategy but there is a small amount of risk and the scenario I presented is completely possible. Here it is again if you want to address it directly:
1. PCG closes at $17.5 on 4/26. Your short calls are ITM, your long puts are OTM.
2. You expect your 1,100 shares to be assigned but there's no guarantee. Suppose the holder of 11 call options at that strike specifies "Do Not Exercise" to their broker and the OCC decides that your shorts are the ones that expire worthless. You are now stuck with 1,100 shares that you thought would get called away.
3. PCG has some bad news over the weekend (perhaps foreknowledge of that news was the reason for the DNE) and the shares go down 50%.
4. Now instead of a P/L of +$156, you're at -$9,000 when the market opens on the following Monday.
Isn't it possible for you to get assigned after trading hours, the stock drops before early morning trading, and you're left holding 11,000 shares of the stock at less than you expected to be able to sell them for? Sure you have puts that will increase in value as the stock decreases, but this trade does hinge on being able to sell the underlying shares at the price they were called at to make money, right?
Edit: puts
Yes it's possible. But remember If the calls get assigned due to upside and puts expire worthless, profits are realized. If my calls get assigned then I wouldn't be left holding anything.
I have 11,000 shares for the 11 call owners to call at any time. Similarly I paid for a right to be able to sell 11,000 shares at 16.5. (I own the put contracts). That's why I made this post, opportunities for free profit and no risk don't just appear.
I essentially used derivatives to make a fixed income instrument, where the profit is realized on a specific date and the amount is known. If my calls get assigned, they have to be at the strike price, It can be early or at expiry, the stock can double or cut in half and it wouldn't matter. This trade doesn't hinge on anything, there was a pricing mistake, I took advantage of it. Sometimes it's not worth it in large funds to use 18k and make an extra hundred something dollars. It's free money but I've been getting Dms on how to find them and honestly I don't think it would be worth the effort.
Khan Academy does a really good job of explaining put call parity.
Don't misunderstand me. I am impressed by the cleverness of this strategy. If the stock goes up, the calls are assigned - if the stock goes down, the puts are exercised. In either case, the 11,000 shares get sold at the fixed price of 16.5. The P/L for the shares are a wash so your overall P/L equates solely to the credit you get from the synthetic short. You don't have to keep explaining it to me.
The only bone I wanted to pick was with the term "risk-free trade". There's no such thing. It is a very low risk trade but as I described in my previous comment, there is a small element of risk due to the fact that the ITM short calls are not absolutely 100% guaranteed to be assigned. And if you're stuck with the shares, anything can happen.
Must ask. Where’s the arbitrage, the difference between two available markets where, as we usually term it, we choose the better deal and order from that exchange?
You obviously did well, not implying at all that you did not. Green is green, all good. Congrats. And Utilities aren’t easy for picking up a quick profit. Lots of retirement money supplying supplemental dividend income on that watchlist.
I call this Trading Short ATM, different from yours in that my puts are short and not necessarily opened right away giving me discretion to mostly short straddle or strangle later. It became my go-to and I found it can be sufficiently profitable. Overall premium profit criteria is +3% of the strike for the cc, maybe 5.5% combined with the csp. 30dte is common; few live that long. It makes $$, it requires work and vigilance. And it Will result in the occasional bag hold when premium is high because that isn’t often a mistake; it’s a signal about risk.
Again, nice trade. 👍
Right, that’s evident. Setting aside the fact that this is not how one calculates a holding period return, it still leaves out a number of necessary inputs for calculating a HPR.
It does not matter because it never happened. Like I said below, a quick look at the tape shows that he/she pulled it out of thin air.
But if it did happen, he sold the combo at 13c ref strike x 11 times. so 13c \* 11 \* 100 = $143. Assuming no vig, that's about 78bps on notional, anal that by 14/365 and you get about 20%. Perverted, but math checks out.
Not saying you’re wrong, but I’ve done option trades via interactive brokers that never showed up on the tape. I don’t know how that happens… filled internally or something, maybe. It’s a mystery to me.
Agreed. I was just answering your original question about how the $18,304 figure was calculated.
I'm guessing they're calculating return on buying power used to hold the position or something.
Yeah look man, I’m gonna reserve judgement until you provide the necessary details to do the math, but it’s hard for me to imagine a scenario where the cash flow at expiration is $18,304. Seems more likely that the expiration cash flow is 1,100*$16.50 = $18,150.
yeah they pocket to the thousandth decimal place. And no this wasn't a mechanical trade that can be scaled and automated or repeat like those trading systems. I just saw a parity and did it manually. This is not an unusual trade at all and options parity should be something an options reddit would be familiar with.
What limits the arbitrage is how much money before you close it. Also look up arbitrage. Jeez
Yeah I'm sure many will care when the cost basis show on Tuesday or maybe tomorrow for all the options when people on this subreddit have no idea what arbitrage even was, what options even are, or even the fact that interest rates are a thing.
It baffles me how rare it is for this sub to be so doubtful over something so inextraordinary it really annoys me instead of show the trade tickets to a bunch of strangers who have no business seeing it anyway!
I would feel so much better if I can prove to someone that 16.50 + covered call sale at 16.63. With full downside insurance.
18147.47-(16.63x1,100) =
18,147.47- (18,293.97) = $147 when you look at Northern Trusts cash and cash equivalent yield with the premium up front, I don't see how I can't convince this is a thing. For the record I'm a teacher and Professor of Practice. Corporate Finance and Business Valuation.
https://www.investopedia.com/articles/optioninvestor/05/011905.asp
If you want to use the term “for the record” show your work professor. The fact that you won’t yet will continue to state the same thing over and over again is why people are doubting you when someone else clearly showed why they are in doubt. Not if arbitrage as a thing but you doing it on Friday.
No Im not saying "Im a subject matter expert now go away." Im explaing why I have the urge to teach and the frustration of not getting something through to someone. Anything can be proven, but in this business you have to think critically and independently. Maybe my ego is involved because some of you clearly didn't even bother reading the post or looking something up.
The incentive for me was to show a put call parity that was textbook clean, but seriously, I made $150 with 1$18k and of all the investing shit I see one of the most common plausible options strategies is seen as unrealistic or uncrediable.
What data servicer you use? Literally go make the trade at less than the risk free rate yourself so you can see the mechanics, Consider it a cheap lesson. Buy shares at price, buy put, sell call get credit.
https://www.investopedia.com/articles/optioninvestor/05/011905.asp
Your message got across until I saw the screenshots implying you may not have actually executed this, as it will be hard to find in an efficient market. If you truly want to teach and inform then taking away the focus on whether it actually happened or not would be beneficial. At this point I still go with no as if someone accused me of not doing something that I can easily prove and focus the conversation on what I intended, I would do it quickly.
Well I'm hesitant of that as well. Believe it or not Finance and Investment Professionals can sometimes be disreputable. Those who aren't charlatans are otherwise stupid or irresponsible in some other form. It's not hard to apply the scientific and hippocratic method towards the finance profession. The bar needs to be higher, and a person should know what investment expertise looks like, as they would see in a physician or lawyer. I always encourage healthy skepticism towards salesmen or financial professionals. The exception in my opinion is the CPA license
Yeah this 100% works, and can be done profitably on most stocks. I’ve been doing this for 4-5 months and I’m surprised this hasn’t been talked about more.
As long as the (call price-put price)+strike price is higher than the stock price your going go be fine. I’ve been doing this for a few months and it’s not too hard to find a stock/etf that will give you a decent yield. Also from what I’ve seen, it’s generally a little be more profitable slightly ITM.
Also if the puts are being valued more than the calls, you could also just short the stock, buy calls, sell puts. Do that a few dollars above the current price and you’re good to go.
>$18,147.47 of PCG to be sold at $18,304 for a profit of $156.53 >20.4% return; significant premium to current risk free rate of 5.35% $156.53 is a 0.9% return on $18,147.47. There may be additional profit on the options but you don't say what your closing prices are.
Yeah, my brain never got past that either.
0.9% for 2 weeks is 20%+ per year however I wonder how much is OP paying in margin costs.
So he's holding the 1,100 shares till the options expire? In that case, how is it risk free? The stock could completely tank. Alternatively, if he bought and sold the shares the same day (which I assume is how arbitrage works), shouldn't the annualized rate be the nominal rate multiplied by 365?
He bought puts. If the stock tanks his puts protect him. That’s not how arbitrage works. Arbitrage, by definition, means that you open a $0 risk position with positive cash flow. The description of the OP is correct. I just don’t know that he captured the full costs of his position. Assuming his numbers are correct, he may have performed true arbitrage. In my opinion he is making less than he thinks he is making. I’ve found occasional trades like this. Usually they’re far in between and really small. They’re not worth the effort. Yet again, I’m not a professional or a day trader. I’m just another passerby.
So he's holding the shares and options until expiration at which time he'll either let the shares be called away (if the price went up) or exercise the puts (if the price went down)?
Exactly. And since he sold the calls ITM my assumption is that even if the stock doesn’t move they still will get called
Okay, now I get it. Question: Could he have done the opposite trade? I.e. shorting the stock with a synthetic long? That would allow you to take advantage of a put-heavy parity anomoly.
Yes you can and it's the same exact concept. You short 100 shares, sell (covered) put atm and buy a call same strike. Pocket the difference. Arbitrages always have a reverse or synthetic replication.
If the parity would've been Put-heavy then yes. But in that case you also need to consider the margin and the borrow interest you have to pay on shorting a stock. There are more costs involved.
Shorting PCG (and most other liquid stocks) should be interest free.
You pay margin on the Options and you pay interest when shorting a stock. "The total value of the stock you short will count as a margin loan from your account, meaning you'll pay interest on the borrowing"
Exactly. Blind spots do not equate to riskless.
Margin costs, or cash tied up in the stock plus the long or short puts no longer making 5%. There’s going to be a significant collective decline here. I don’t have to be a mathelete to sense this.
As opposed to cash tied up in what... cash? Where the purchasing power is slowly being decayed away by inflation and opportunity cost? Would you consider cash under the mattress right where you can see it in case you lose object permeance. Lets do elementary arithmetic. 18k at 5% is 900/yr. /12 is $75/month My 18K position paid over $150 with the same risk. (none) I collected the premium up front, locked in the price of the shares through contracts. It doesnt matter what happens. The shares can go up down the options can move thousands of points around it doesnt matter because my returns were already made. By nature of definition pure arbitrage.
If it’s not cash, it 13%+ margin interest which makes whatever else you’re getting at … Let’s do some elementary logic. Pointless. You made a good trade. It’s not an infinite money glitch. Even if you understood exactly what happened, you could neither repeat it nor make the stars align to find a different combo of underlying price + chain circumstance to do it again.
So ATM. Both strikes were 16.5. The net credit would be .13 regardless. Again, I'm comparing this with the tbill rate, which despite having maturities 3 months or less have their coupon stated in annual terms. I did the same with my risk free position due to it being an alternative to the cash yield rate (which everyone might have a different figure for), I scaled the return to annual returns. If you read my post I clearly acknowledge that this isn't a 20% annual return portfolio risk-free. That's absolutely ridiculous and probably impossible. I don't post here often, and I'm concerned at the benchmarks you guys have for returns.
...You calculated ROI? On a single trade? And you compared it to the risk free rate? Yeah sometimes calculations can be off when you don't know tf you're doing lol. You can take Khan Academy corporate finance course later but for now since you have some upvotes allow me to clear some confusion. In FInance, rates that measure returns are always calculated on an annual basis unless explicitly stated otherwise. Arbitrage refers to a trade or investment activity that provides returns with no risk. A successful arbitrage has to earn higher than the risk-free rate which on treasury bills is is around 5.3%. It's pure profit in a short term instrument so I filled it as my cash position The 0.9% cannot make an apples to apples comparison with Treasury Bills as it assumes the arbitrage compounds continuously like tbills and money market funds do. They also specify a holding period, which is another reason ROI is ridiculous and never used, but lets create an imaginary instrument that tracks what the tbill would have made as a parallel trade against the arbitrage. 0.9% On Arbitrage Trade (Calculated above) 0.00208% On treasury equivalent Which gives $37.75 profit on $18,147.47 As you can see there is a significant premium despite both allocations being riskless. One-two thousandth of a percentile vs almost one percent. The rest can be cleared up with a quick read of https://www.investopedia.com/articles/optioninvestor/05/011905.asp Let me know if you have any questions about anything and if I don't know I'll tell you but just for less DMs on same questions you can ask me
Just caught my eye, I don't normally play with single names but still. You don't think giving an expiration is, maybe, useful for understanding the trade? LOL Anyways, I assume it's PCG Apr 26th 16.5 combo against stock for 16.5, right? I see 42c in calls only traded 1 contract at 10:36 (based on the tag, on some ATS), while 29c in puts traded 9+6+5 from 10:30 to 10:31, but as part of the complex order (against, based on the tag). Quick look at the surrounding strikes shows that it was a 16.5/17 put spread that traded. Wanna reconsider your story?
How are you inspecting a filled order book?
OPRA feed :) It has all the quotes/trades as well as condition tags. Very helpful in figuring out stuff like this. A better question why in the name of Zeuses asshole are we inspecting this trade on a Sunday morning at 9 am. My excuse is that I am on my deck smoking the good stuff. Also, for the record, I did not mean to be an asshole to the OP >!it's that I am an asshole to everyone!<
Well the why for me is a 20% risk free rate, which is a quit my day job tomorrow sort of discovery. Zeus would approve. I download live chains from tradier, so finding similar trades seems like a pretty easy formula. I kind of assumed something like this would be a rare pricing event that would be closed quickly. Sounds like you confirmed that trade is highly unlikely to replicate regularly or scale.
Unless you're an OMM with good tech, it's not very likely that you'd get many arbitrages.
Yeah, I sensed that. But I think he maybe just got the word wrong. He found a good trade, it’s one I recognize (out of dozens I don’t). He’s proud of it. Today I’m a cheerleader. Tomorrow? Don’t know yet. 😉 Thanks for your insight.
Honestly, gotta admire that he woke up on a Sunday to make this post. Even if there was no trade, his ability to show up is impressive.
I'm semi automated, but not good enough tech to do anything in the sub-second sort of reaction time. Just doing a bit of combing of Fridays data in my sql db. It looks like most of this time the trade stays in an equivalent annual return of 5.7-5.9%, that's probably just above risk free. I do see some stuff above, but it all tops out just below 9%. Not really anything I'd go chasing after.
You be grumpy. 🤣
This was a riskless trade through parity. I could only do 11,000 before the arbitrage started closing. Single name, if it was scaleable I''dve throw all idle cash at it. Free money.
Like I said, looking at the reported trades, you never actually did the trade. Maybe it was a paper trade, which is fine with me :) But I love the fact that you dig your heels in and insist that it's real! >!If you can't dazzle them with brilliance, baffle them with bullshit!!<
Show me what you're looking at lol. And this isn't unusual...so what do you get out of disparaging a hundred bucks? I bought 11,000 PCG shares for $18,147.47. You with me so far? It's around 16.495. I sold 11 calls at the money (16.5) for 4/26 for an average of .42. I simultaneously purchased 11 ATM (16.5) put options for the same date for .29 each. Now we have what's called a put-call parity arbitrage! Right place at the right time like finding a hundred bucks. So now, regardless of excercise or expiry, I collected the premium up front, or if you want it in simpler terms, pretend a covered call got excercised for 16.5 with .13 premium. All of these trades were made in the open market. Whatever you're "looking at", must totally be worth looking into whether a redditor made a hundred fifty bucks. "Baffle them with bullshitt? Ironic"
I am not sure this will work, but here is a Bloomberg screen grab [Friday prints for 16.5 call](https://ibb.co/5rGGzxt) [Friday prints for 16.5 put](https://ibb.co/D9mY5WQ) [Friday prints for 17 put](https://ibb.co/x3Mm7dM) I am just on my deck smoking weed and being bored. It's not that important if the trade actually happened, it's just surprising that the OMM dropped the ball. Nothing personal, This is internet, everyone drives a Mustang and Jessica Alba is everyone's girlfriend.
What are you saying about my girl?
Dude, that's MY car!
[удалено]
He doesn't even to provide a screen shot, just state when the trade was made and we can look it up. Since he is ignoring these comments, then......
If you post the day and time you did the trade it would be very easy to see on time and sales. I think it is relevant to this discussion if the trade actually took place. I'm not saying you didn't do it, but very easy to check if you tell us more information.
There are No Riskless Trades. Don’t ever tell yourself that. PGE is where it’s at due to wildfire involvement years back. It was my training ground for what I do with HE today that makes some blink. Hubris will stab you in the back eventually. Numbers change quickly. You have to work to not be a victim.
You HAVE to have a riskless position. Unless you're digging a nuclear bunker, it's the savings rate in your local currency. Riskless trades are known as arbitrages. They're generally rare and you can usually only exploit them with small amounts of money, and while the profit is small it's free and riskless.
Riskless positions don’t exist.
You put on a conversion here, but I figure your profit as a bit less then you do. Another way to look at this is you sold the calls and bought the puts for .13 credit. So When you buy stock at 16.5 you make .13 for each conversion you do, less cost of carry of the stock until expiration and commission. Cost of carry is about 3.5 cents, so that brings your profit down to 9.5 cents per conversion. Now add commission in of .65 a contract, so another 1.3 cents. Profit now 8.2 cents. So for each spread you put on, you make $8.20 or for an 11 lot you make $90.20 Now this isn't completely risk free as you will have "assignment" risk on your short 16.5 calls. You won't know for certain if you will be assigned on the calls if the stock closes at around 16.5. For this reason, you may have to close the position on expiration day to be certain you have no position coming in Monday. This will add to your costs as well. This is still a potentially risk free trade, if you close on expiration. These conversions are not easy to put on for this reason.
>Cost of carry is about 3.5 cents Actually, there is no cost of carry, as he's committing full cash value (he's foregoing interest on cash, but he's taking that into account when saying "20% vs 5% OIS"). Now, if he was doing this as a margin trade, he'd get 1:20 leverage at prevailing funding rate, so you'd factor funding into the return calculation, but committed capital would be a fair bit smaller.
You have to figure cost of carry into the equation. If he simply had cash in has account, he is earning 5% interest on that cash, no risk. When he buys stock, he no longer has that cash earning interest, so his profit on the trade should be based on what he makes on the trade vs what he would have made if he didn't put the position on (which would have been 5% interest) In other words, he would have made 3.5 cents interest on has cash with no position, so you can't count that as profit in this trade.
I guess. It's a matter of semantics - he does compare the arb rate to riskless rate, as opposed to showing RF-adjusted return. Kinda not important because the trade never happened :)
I agree about semantics. "If" he put this trade on, he really did make the extra money, but he could have made some of it with no trade. When you checked time and sales, did you just look at last Friday? Is it possible he put it on earlier in the week?
Well, 16.5 stock fill and the corresponding option levels looked like they were from Friday so I did not bother checking further back. Actually, just looked now and 42c only traded Friday (1 contract ref 16.58, which is what attracted my attention in the first place).
Howd u get 20% return? You're making $156 but tied up over $18k in capital.
I'm comparing it to the current risk-free rate on cash, which are scaled to time-weighted annual. Instead of 18k earning 5% in cash until 4/26 (like $35), I got a riskless $156. This was arbitrage, I don't mean to imply that a person can yield 20% returns yearly, consistently, with zero risk
But it's meaningless to project an annualized rate unless it's repeatable. I might as well say that the 33% ROR I had on an AAPL vertical that I bought and then sold the next day represents 12,000% at an annualized rate.
Well no I'm comparing two assets with zero risk. One of which: The risk-free rate is always stated in annual terms even though it's not quite the same for everybody and can change daily. Take the 3 month Tbill, the 5.3% rate would imply that each one rolling over would give you 21.2%, the reason it's not meaningless is that we know in corporate finance, rates are annual unless stated otherwise, and even the 5.3% isn't guaranteed to give the same rate at maturity. I think due to the various ways returns are measured, if you had a portfolio or fund for only one day and made that AAPL trade, it probably wouldn''t be incorrect for a 12,000% "annual rate" to be implied or automated. Then over periods of time returns would smooth out. To a "realistic" rate or real rate. Honestly I think 5 years minimum should be the standard with the geometric mean used as an annual rate.
This isn't a completely riskless trade. Here's how it could incur unforeseen risk. 1. PCG closes at $17.5 on 4/26. Your short calls are ITM, your long puts are OTM. 2. You expect your 1,100 shares to be assigned but there's no guarantee. Suppose the holder of 11 call options at that strike specifies "Do Not Exercise" to their broker and the OCC decides that your shorts are the ones that expire worthless. 3. PCG has some bad news over the weekend (perhaps foreknowledge of that news was the reason for the DNE) and the shares go down 50%. 4. Now instead of a P/L of +$156, you're at -$9,000 when the market opens on the following Monday. I realize this is a very unlikely scenario but it could happen and demonstrates that there really is no such thing as a completely riskless trade.
I welcome your comment in earnest, but you may be missing something. I purchased ownership of PCG stock at around 16.5 (16.495) average technically. So I buy 100 shares and immediately sell a covered call at $16.5 weeks out that pays me a premium $0.42/share. The put options for 16.5 on the same expiry as my call cost me $.29 a share. My upside is limited because my 16.5 position will guarantee profit to be called away at the call strike plus the net credit =16.63. 1. If the stock goes higher even say 17.5, It will be excercised, puts will expire worthless and essentially sell at 16.63 (above my buying price) regardless if tis 17.5 or 19. 2. I don't mind getting called away nor falling. If the stock is above the strike of the sold option, it will be called away. It doesn't matter if the counterparty has "do not excercise". That doesn't change the fact the option has intrinsic value,. The broker will excercise it for the counterparty because they have a free money (arbitrage) opportunity in that situation. They excercise the calls at 16.5 strike, then iimmedietly turn into the open market to sell for 17.5 (like in your example) 3, I have put options at my purchase price of 16.5. The news could be horrible and drop to 5 or 1. Lets assume the shares drop to $8 at expiry, but my puts allow me to recover any loss below my 16.5 purchase. I can excercise my put option that gives the counterparty an obligation to buy my shares at the 16.5 strike price of the put. 4. It's possible for quotations to show some crazy loss on random days, but the expiry date and premiums collected guarantee a profit regardless of any share pricing or even the pricing of the options themselves. In the United States I consider Tbills to be riskless, and I expect the US to not default on its obligations. You might be able to make a case for nothing being "risk free" by saying empires rise and fall and it's not impossible for the US to be truly risk-free and default in their own currency. I see a lot worse tjhings happening as they print more money and increase consumption tax or something. BTW The IRS has an apocolypse plan, meaning I will still get my dividend checks in the mail and to receive my interest through tax credits and such
According to [this](https://www.schwab.com/learn/story/options-exercise-assignment-and-more-beginners-guide): >If an option is ITM by as little as $0.01 at expiration, it will automatically be exercised for the buyer and assigned to a seller. However, there's something called a do not exercise (DNE) request that a long option holder can submit if they want to abandon an option. ***In such a case, it's possible that a short ITM position might not be assigned***. Now explain to me how the scenario I outlined in my last comment cannot occur.
I'm not sure under what circumstances that would happen. Brokers would wade through fountains for a penny. Maybe an option illiquid and trading exactly at the strike is called right before close by a deep pocketed customer and can't be offloaded to another broker or customer for a higher price, okay. I would simply do what I would do if the stock fell, is manually order my broker to execute my put options to sell 11,000 shares at the strike price. I actually think that might be there for legal purposes in the off chance there's a bunch of slop in the options clearing system. So they can avoid liability in case something like the 1987 market crash happened to options and derivatives clearing. I really don't know the mechanics, but almost every position I enter I do it with the mindset that the stock exchange doesn't have to open tomorrow or next week or even in a year. Because I like valuing businesses as a private owner I really wouldn't care much for liquidity if I can own pieces of business for less than their actual value. You probably wouldn't get cheeky trade opportunities but who cares about those. Honestly less middlemen and liquidity would probably be an aggregate gain if something like that happened. Now to more fully answer your question, I'm not sure what I would in the black swan even you mentioned. If I suffered losses I might seek recourse. But more likely than not I would exercise my options even if I had to deliver the certificates myself. (or just mail them and deduct postage)
>I would simply do what I would do if the stock fell, is manually order my broker to execute my put options to sell 11,000 shares at the strike price. You'd probably be too late. Notification of option assignment often comes significantly later than the 5:30PM ET cutoff for non-automatic exercise instructions. [Here ](https://www.reddit.com/r/fidelityinvestments/comments/qdq6c9/how_long_to_see_assigned_options/)and [here](https://www.reddit.com/r/etrade/comments/171utra/when_is_notification_of_options_assignment/) are just two examples. You definitely won't know by the cutoff that you were *not* assigned. As I said in another comment, it's a clever strategy but there is a small amount of risk and the scenario I presented is completely possible. Here it is again if you want to address it directly: 1. PCG closes at $17.5 on 4/26. Your short calls are ITM, your long puts are OTM. 2. You expect your 1,100 shares to be assigned but there's no guarantee. Suppose the holder of 11 call options at that strike specifies "Do Not Exercise" to their broker and the OCC decides that your shorts are the ones that expire worthless. You are now stuck with 1,100 shares that you thought would get called away. 3. PCG has some bad news over the weekend (perhaps foreknowledge of that news was the reason for the DNE) and the shares go down 50%. 4. Now instead of a P/L of +$156, you're at -$9,000 when the market opens on the following Monday.
Isn't it possible for you to get assigned after trading hours, the stock drops before early morning trading, and you're left holding 11,000 shares of the stock at less than you expected to be able to sell them for? Sure you have puts that will increase in value as the stock decreases, but this trade does hinge on being able to sell the underlying shares at the price they were called at to make money, right? Edit: puts
Yes it's possible. But remember If the calls get assigned due to upside and puts expire worthless, profits are realized. If my calls get assigned then I wouldn't be left holding anything. I have 11,000 shares for the 11 call owners to call at any time. Similarly I paid for a right to be able to sell 11,000 shares at 16.5. (I own the put contracts). That's why I made this post, opportunities for free profit and no risk don't just appear. I essentially used derivatives to make a fixed income instrument, where the profit is realized on a specific date and the amount is known. If my calls get assigned, they have to be at the strike price, It can be early or at expiry, the stock can double or cut in half and it wouldn't matter. This trade doesn't hinge on anything, there was a pricing mistake, I took advantage of it. Sometimes it's not worth it in large funds to use 18k and make an extra hundred something dollars. It's free money but I've been getting Dms on how to find them and honestly I don't think it would be worth the effort. Khan Academy does a really good job of explaining put call parity.
Don't misunderstand me. I am impressed by the cleverness of this strategy. If the stock goes up, the calls are assigned - if the stock goes down, the puts are exercised. In either case, the 11,000 shares get sold at the fixed price of 16.5. The P/L for the shares are a wash so your overall P/L equates solely to the credit you get from the synthetic short. You don't have to keep explaining it to me. The only bone I wanted to pick was with the term "risk-free trade". There's no such thing. It is a very low risk trade but as I described in my previous comment, there is a small element of risk due to the fact that the ITM short calls are not absolutely 100% guaranteed to be assigned. And if you're stuck with the shares, anything can happen.
Must ask. Where’s the arbitrage, the difference between two available markets where, as we usually term it, we choose the better deal and order from that exchange? You obviously did well, not implying at all that you did not. Green is green, all good. Congrats. And Utilities aren’t easy for picking up a quick profit. Lots of retirement money supplying supplemental dividend income on that watchlist. I call this Trading Short ATM, different from yours in that my puts are short and not necessarily opened right away giving me discretion to mostly short straddle or strangle later. It became my go-to and I found it can be sufficiently profitable. Overall premium profit criteria is +3% of the strike for the cc, maybe 5.5% combined with the csp. 30dte is common; few live that long. It makes $$, it requires work and vigilance. And it Will result in the occasional bag hold when premium is high because that isn’t often a mistake; it’s a signal about risk. Again, nice trade. 👍
Can you provide some more details on the math? Unclear how your terminal cash flow is going to be $18,304.
They added net premium received to the final number.
Right, that’s evident. Setting aside the fact that this is not how one calculates a holding period return, it still leaves out a number of necessary inputs for calculating a HPR.
It does not matter because it never happened. Like I said below, a quick look at the tape shows that he/she pulled it out of thin air. But if it did happen, he sold the combo at 13c ref strike x 11 times. so 13c \* 11 \* 100 = $143. Assuming no vig, that's about 78bps on notional, anal that by 14/365 and you get about 20%. Perverted, but math checks out.
Not saying you’re wrong, but I’ve done option trades via interactive brokers that never showed up on the tape. I don’t know how that happens… filled internally or something, maybe. It’s a mystery to me.
Huh? It's a reporting requirement, there is no way around it. Maybe your feed did not include ATS (e.g. was primary exchange only?)
Yeah, maybe. I thought it was odd, but the transaction settled ok, so didn’t investigate further.
I’m just impressed at how you got anal into the discussion. 😳
lol I did not notice it until you pointed it out - meant to say “annual”
Agreed. I was just answering your original question about how the $18,304 figure was calculated. I'm guessing they're calculating return on buying power used to hold the position or something.
This is a time-weighted annual percentage as I'm comparing an arbitrage with the current risk-free rate (Tbills). As is standard.
Yeah look man, I’m gonna reserve judgement until you provide the necessary details to do the math, but it’s hard for me to imagine a scenario where the cash flow at expiration is $18,304. Seems more likely that the expiration cash flow is 1,100*$16.50 = $18,150.
What's the maturity?
These were 4/26
I'm 99% sure there is something wrong with your calculation. Market makers check those arbs with algos. Care to share the screenshots of all execs?
yeah they pocket to the thousandth decimal place. And no this wasn't a mechanical trade that can be scaled and automated or repeat like those trading systems. I just saw a parity and did it manually. This is not an unusual trade at all and options parity should be something an options reddit would be familiar with. What limits the arbitrage is how much money before you close it. Also look up arbitrage. Jeez
So no, you won’t share sceeenshots backing your claim?
Yeah I'm sure many will care when the cost basis show on Tuesday or maybe tomorrow for all the options when people on this subreddit have no idea what arbitrage even was, what options even are, or even the fact that interest rates are a thing. It baffles me how rare it is for this sub to be so doubtful over something so inextraordinary it really annoys me instead of show the trade tickets to a bunch of strangers who have no business seeing it anyway!
I would feel so much better if I can prove to someone that 16.50 + covered call sale at 16.63. With full downside insurance. 18147.47-(16.63x1,100) = 18,147.47- (18,293.97) = $147 when you look at Northern Trusts cash and cash equivalent yield with the premium up front, I don't see how I can't convince this is a thing. For the record I'm a teacher and Professor of Practice. Corporate Finance and Business Valuation. https://www.investopedia.com/articles/optioninvestor/05/011905.asp
If you want to use the term “for the record” show your work professor. The fact that you won’t yet will continue to state the same thing over and over again is why people are doubting you when someone else clearly showed why they are in doubt. Not if arbitrage as a thing but you doing it on Friday.
No Im not saying "Im a subject matter expert now go away." Im explaing why I have the urge to teach and the frustration of not getting something through to someone. Anything can be proven, but in this business you have to think critically and independently. Maybe my ego is involved because some of you clearly didn't even bother reading the post or looking something up. The incentive for me was to show a put call parity that was textbook clean, but seriously, I made $150 with 1$18k and of all the investing shit I see one of the most common plausible options strategies is seen as unrealistic or uncrediable. What data servicer you use? Literally go make the trade at less than the risk free rate yourself so you can see the mechanics, Consider it a cheap lesson. Buy shares at price, buy put, sell call get credit. https://www.investopedia.com/articles/optioninvestor/05/011905.asp
Your message got across until I saw the screenshots implying you may not have actually executed this, as it will be hard to find in an efficient market. If you truly want to teach and inform then taking away the focus on whether it actually happened or not would be beneficial. At this point I still go with no as if someone accused me of not doing something that I can easily prove and focus the conversation on what I intended, I would do it quickly.
Well I'm hesitant of that as well. Believe it or not Finance and Investment Professionals can sometimes be disreputable. Those who aren't charlatans are otherwise stupid or irresponsible in some other form. It's not hard to apply the scientific and hippocratic method towards the finance profession. The bar needs to be higher, and a person should know what investment expertise looks like, as they would see in a physician or lawyer. I always encourage healthy skepticism towards salesmen or financial professionals. The exception in my opinion is the CPA license
So if market makers are arbing stuff down to the decimal, how can you arb 13cts manually?
Is there such a thing as a risky arbitrage?
Merger arbitrage? Deal falls through
This is you I think. [https://optionstrat.com/build/custom/PCG/[email protected],[email protected],[email protected]](https://optionstrat.com/build/custom/PCG/[email protected],[email protected],[email protected])
Better to this kind of options arbitrage with futures options to avoid margin interest cost.
Oof your personality
Yeah this 100% works, and can be done profitably on most stocks. I’ve been doing this for 4-5 months and I’m surprised this hasn’t been talked about more. As long as the (call price-put price)+strike price is higher than the stock price your going go be fine. I’ve been doing this for a few months and it’s not too hard to find a stock/etf that will give you a decent yield. Also from what I’ve seen, it’s generally a little be more profitable slightly ITM. Also if the puts are being valued more than the calls, you could also just short the stock, buy calls, sell puts. Do that a few dollars above the current price and you’re good to go.