Arbitrage opportunities in Options

Thanks for sharing.

Thanks all, in the condor plus hedge one need to sell 2 puts October at 1.25.

Covered calls ore ok, one can book profits like yesterday Hindalco withhout selling ones stock position. 

Thanks Mathew for the clarification...need to go more into it ..anyway it has stirred in me to study this.

Actualy this opportunity lasted for around 48 hours I think. Then yesterday Hindalco picked up 7 points to 141 in which case one should have had a Condor which is selling  put and selling a call. Here two puts should be sold to maximise profit. A Hedge with  buying a higher priced Option say 135 in which case one could have pocketed off the selling price on put where as the loss in the call selling would have been offset by the buy call option. In this strategy one need not have to worry abut the price movement one can wait for some time and square since there is a hedge in play when the price moves beyond the normal moemntum seen in this is stock.

Jyothi, calculation is as follow, one sells Oct calls at 12.25 which will be 12.25x3516 credited to your account. Now before the price move beyond 135 one squres off which is (135-125)x3516=10x3516 debited from your accoutn which fetches a profit of 12,25-10=2.25 multiplied by contract size of 3516 rounded off to 7000 rupees per contract may be slightly less. 

Charles, I gave an elaborate exposition of Options but when clicked the submit I was actualy logged out and lost everything so I am presenting a much smaller version due to fatigue.
Trading in Options is not simple for the beginer. One has to learn the differnet trading strategies like bos, time, band, condor, strangler, straddle, bull and bear spreads, strap, strip etc; etc along with Greeks of Options like delta, lambda, omega and theta which when used can help one to design maximum return strategies from different positions arising. My advise is Stocks though losses can be high Options if played with proper understanding can limit losses. So if one can get a book or join a course in Derivative trading or buy a good book one can start. Otherwise risky.

Nice idea Mr. Mathew, its really very true. If becomes successful, can cover call writing protection against price appreciation while taking advantage of the arbitrage opportunity . But the calculation seems a bit confusing. Any ways, thanks for sharing...

Options are contracts to buy called Call options or sell calle Put options a specified quantity of stocks called the contract number at a specified price called Exercise price and at a specific date called Expiry date.
Here we have Oct expiry Hindalco with exercise price 125 priced at 12.5 American Option meaning one can square off before expiry. European Options one cannot square of before expiry. Squaring oof means one can when squaring get the difference between the Spot stock price and Exercise price.
Now in the particular arbitrage we discuss we sell a Call contract at 12.25 which put in your account 12.25x3515 the contract size. Immediately before the price moves beyond 135 one squreas of where you pay 10x3516 where 10 is 135-125 the difference between the spot and exercise price. It is like buying something at 10 and selling at 12.25 with a profit of 2.25, here 2.25x3516 almost equal to 7000 rupees.
I am not claiming this is a comprehensive explanation of Options one need to study from books and one should not attempt trading in options without gaining expertise in the jargons and processes because if one sell Options ones loss potential is unlimited and if one buys options call or put ones loss is limited to ones purchase price, though gain in buying can be unlimited. Moreove one will need a large trading account to get accepted to trade in Options.

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Thanks for sharing sir , covered call writing can offer protection against price appreciation while taking advantage of the arbitrage oppurtunity .

Mathew,I Did not understand the calculation may be its sixer for me.If it can be elaborated for a layman like me it will be useful