weekly pen & options arbitrage opportunities

Hi Folks

I put up an analysis of arbitrage trade opportunities between PEN and PENOA and PENOC a couple of weeks ago. Thought I would post it again in case its of interest to anyone. I'm tracking it on a weekly basis anyway.

The table below shows the comparative (daily closing only) prices of the 3 instruments, along with the difference in price compared to the 3c option premium. PENOA is currently trading at a discount to the option conversion price, while PENOC is trading at a premium to it, reflecting the extra time value priced into this instrument.

I've also included a chart which plots the premium/discount of PENOA and PENOC to PEN. As you can see over the last 6 weeks both instruments have gotten cheaper compared to PEN, essentially as PEN's price has increased from its lows in Jan/Dec.

For the upcoming week, if PEN increases in price, then it is probable that PENOA and PENOC will become relatively cheaper to the 3c conversion price, whereas if PEN's price decreases, then it is probable that PENOA and PENOC will become relatively more expensive to the 3c conversion price.

PEN remains in its bullish price channel (see PEN daily chart below), and gapped up on the new drilling results announcement to close at the top of the old 6.4/6.8 gap on Friday, on good volume. Probability of price movement therefore remains biased in the upwards direction for the coming week imo, and positive general market sentiment will help. This means for a possible arbitrage trade, the probability is biased towards the options becoming relatively cheaper to the 3c conversion price to PEN.

The above is a purely technical point of view.

Cheers, Sharks.