Add training workflow, datasets, and runbook

training_data/curated/text/90b42ad70bff4886fe0c673f92835755dcae80242886e022427f9a1bb0fb3455.txt

@@ -0,0 +1,33 @@
+Chapter 27: Arbitrage 431 
+In an actuarial sense, the carrying cost could be expressed in a slightly more complex 
+manner. The simple formula (strike x r x t) ignores two things: the compounding 
+effect of interest rates and the "present value" concept ( the present value of a future 
+amount). The absolutely correct formula to include both present value and the com­
+pounding effect would necessitate replacing the factor strike (1- rt) in the profit for­
+mula by the factor 
+Strike 
+(1 + r)f 
+Is this effect large? No, not when rand tare small, as they would be for most option 
+calculations. The interest rate per month would normally be less than 1 %, and the 
+time would be less than 9 months. Thus, it is generally acceptable, and is the com­
+mon practice among many arbitrageurs, to use the simple formula for carrying costs. 
+In fact, this is often a matter of convenience for the arbitrageur if he is computing 
+the carrying costs on a hand calculator that does not perform exponentiation. 
+However, in periods of high interest rates when longer-term options are being ana­
+lyzed, the arbitrageur who is using the simple formula should double-check his cal­
+culations with the correct formula to assure that his error is not too large. 
+For purposes of simplicity, the remaining examples use the simple formula for 
+carrying-cost computations. The reader should remember, however, that it is only a 
+convenient approximation that works best when the interest rate and the holding 
+period are small. This discussion of the compounding effect of interest rates also rais­
+es another interesting point: Any investor using margin should, in theory, calculate 
+his potential interest charge using the compounding formula. However, as a matter 
+of practicality, extremely few investors do. An example of this compounding effect on 
+a covered call write is presented in Chapter 2. 
+BACK TO CONVERSIONS AND REVERSALS 
+Profit calculation similar to the conversion profit formula is necessary for the rever­
+sal arbitrage. Since the reversal necessitates sho1ting stock, the trader must pay out 
+any dividends on the stock during the time in which the position is held. However, 
+he is now bringing in a credit when the position is established, and this money can 
+be put to work to earn interest. In a reversal, then, the dividend is a cost and the 
+interest earned is a profit.