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except that the MST is both about adjust and delist. also, meant arb only in technical sense of riskless profit.

Posted by: SPrasad2 on Jan 12, 20:38 in response to secretstalker's post You'd have to come up with a different term for that......

i guess my bigger point was that the spread, except for transaction fees, shouldn't exist.  i get your point that over time, the securities might diverge if you see a stock as having a potentially huge opening and freefall post that (e.g. New Moon).  however, 1) regardless of the post-open adjust, the spread, if it exists, will always result in risk-free profit if you hold it until either delist or price convergence and 2) it certainly doesn't make any sense in that scenario to IPO the derivative $10 higher than what the moviestock is trading at, unless you're expecting the stock to have legs, which the vast majority of movies (avatar excepted, of course) just don't have.

how are CX derivatives priced? SPrasad2 Jan 12, 18:50

when you figure that out, let me know mickpix Jan 12, 19:13

They IPO three months before the movie opens wide at the exact price of the movie stock. From there they move as any other stock. {nm} fourstars Jan 12, 19:23

That was the previous method. Starting today, they IPO at the same price as the equivalent on Cantor Exchange. {nm} Antibody Jan 12, 19:25

However, since they never adjust, the derivative can end up being way under or overpriced and ending up as an obvious ARB or BRA situation. {nm} fourstars Jan 12, 19:25

that makes sense--but why price them as arb on day 1? unless i'm missing something, all three IPOs today have ~$10 riskless spreads on them {nm} SPrasad2 Jan 12, 19:38

There isn't any arbitrage between MST and CX Derivatives, because their values are tied to box office, not to each other. {nm} Antibody Jan 12, 19:51

except that both have to delist at the same price, right? SPrasad2 Jan 12, 19:59

That's a fair point. The decision was made to mimic Cantor Exchange. {nm} Antibody Jan 12, 20:05

It wouldn't be possible to be ARB or BRA on Day 1 because there won't have been any box office reported on Day 1 secretstalker Jan 12, 20:10

the individual CX deriv isn't--but the spread certainly is an arb trade since the MST and CX must delist at the same price {nm} SPrasad2 Jan 12, 20:15

You'd have to come up with a different term for that... true, one or the other could be overpriced/underpriced secretstalker Jan 12, 20:27

except that the MST is both about adjust and delist. also, meant arb only in technical sense of riskless profit. SPrasad2 Jan 12, 20:38

this whole conversation is pointless, since Antibody said they are IPOing CX at Cantor Exchange prices, end of story ndmaster Jan 12, 20:58





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