Can anyone help my little brain - (I am refering to pf 239 book5 of Schweser) How is it an arbitrage when it is an expected option price? (ie size of up/ down move are estimates - no?) Isn’t this just trying to take advantage of a perceived market mis-pricing?
This was discussed before… there is no real arbitrage here, as you correctly perceive, as the up and down movements are based on volatility (historical or implied, they are still just estimates).