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Joined: February 4th, 2011, 4:03 pm

Trading IV Arbitrage with 2 calls

February 11th, 2011, 3:44 am

Hi,First of all let tell you my progress. I did a simple model to trade IV arbitrage using a ATM Calls and a Stock.The result was great, just need to check about the costs.So, later I was wondering if I couldnt do it using a ITM call in place of a Stock. So then i wouldn't need so much money to buy the stock.The first model is a simple Bollinger in the IV of the ATM Call.The second i was think that would be more accurate to use a ATM - ITM (IV) or ATM/ITM (IV) or maybe somethink more sophisticated.Regards,Marco PS: Put options have no liquidity so there is no way to do a straddle