/biz/ - Business & Finance

>>54186753
When you're doing pairs trading as a form of arbitrage, yes, it's very quick, and I don't expect to do that. It's more like longing one ticker and shorting another as a form of hedging. Eg, +KO -PEP.
So now you have two separate positions hedging each other. In a simple example, 600 KO should roughly equal 200 PEP (ignoring fees, margin, and ATR/volatility on price movements). This means your portfolio should more or less retain the same value. From there, you can write CCs or CSPs against those positions. Think of it as a wheel strategy, but you're doing it with two tickers that are hedging eachother.
I had the idea today but I'm going to look into it; I later found some post on a forum from 2009 that suggested it only works in sideways markets, which might actually be a benefit right now.
And if you're wondering why KO has an ITM and OTM CC, it's because that leg would be done in a TFSA which doesn't allow CSPs but an ITM CC is a workaround