When reading posts, there are yellow stars against the names of the most respected Shrewds. The number of points in the star, starting at 3, represents the Shrewd'm-Star rating. This number is the average recommendation that the author received over the last 12 months.
- Manlobbi
Halls of Shrewd'm / US Policy❤
No. of Recommendations: 0
The price spread is almost 3% now. Wonder why?
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Umm's response from cupla days ago May offer you adequate explanation. It did for me.
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It was interesting watching the run up yesterday. The A shares trade in such low volume that the bid- ask spread goes all over the place. There was a sudden spike to 500k, presumably because of a buyer with a market order and no seller available. Any issue with volume in the range of a few just a few thousand shares a day needs to be done with limit orders.
I have to be careful with my $20 REIT preferred shares. Hard to imagine being sloppy with a $500,000 stock.
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As I type:
A's $497,000
B's $319
497,000/1500 = $331
Approximately 10% difference between B trading price and the 1/1500 value.
Are A's priced rich, or, are B's a 10% bargain?
Is this an arbitrage opportunity presented?
m
No. of Recommendations: 1
A's $497,000
B's $319
497,000/1500 = $331
Approximately 10% difference between B trading price and the 1/1500 value.
Are A's priced rich, or, are B's a 10% bargain?
Is this an arbitrage opportunity presented?
m
Not a pure arbitrage, since they are not convertible in the direction you would need to capture the spread. But if you had some A-shares in a tax deferred account (or live in Monaco) you could sell the A-shares and buy an equal dollar amount of B-shares with the proceeds. I do this fairly often with another company that has non-convertible A and B shares and the back and forth has increased returns in the tax free accounts I can do that in (compared to the taxable accounts I can't do it in). If you don't have any of the A-shares to sell tax free, it may be possible to short some A-shares against your B-share position and "hope" the spread narrows. That's not a pure arbitrage and you will need to consider the holding costs of the trade and the risk that the spread blows out wider. Personally I wouldn't bother with shorting BRK.A. I think the market for BRK.A can be distorted by the low volume (which is much lower than the reported volume since the advent of "fractional share" trading.
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I believe the difference between $319 and $331 is more like 3.7% than 10%.
Perhaps you meant dollars, not percent.
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Is this an arbitrage opportunity presented?
Why not download into the prices for the past year and see how much the deviation varies first?
