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+Chapter 27: Arbitrage 445 
+The put arbitrage has an opposite effect. This arbitrage involves buying stock in 
+the market. The offsetting stock sale via the put exercise takes place off the exchange. 
+If a large amount of put arbitrage is being done, there may appear to be an inordi­
+nate amount of buying in the stock. Such action might temporarily hold the stock 
+price up. 
+In a vast majority of cases, however, the arbitrage has no visible effect on the 
+underlying stock price, because the amount of arbitrage being done is very small in 
+comparison to the total number of trades in a given stock. Even if the open interest 
+in a particular option is large, allowing for plenty of option volume by the arbi­
+trageurs, the actual act of doing the arbitrage will force the prices of the stock and 
+option back into line, thus destroying the arbitrage. 
+Rather elaborate studies, including doctoral theses, have been written that try 
+to prove or disprove the theory that option trading affects stock prices. Nothing has 
+been proven conclusively, and it may never be, because of the complexity of the task. 
+Logic would seem to dictate that arbitrage could temporarily affect a stock's move­
+ment if it has discount, in-the-money options shortly before expiration. However, one 
+would have to reasonably conclude that the size of these arbitrages could almost 
+never be large enough to overcome a directional trend in the underlying stock itself. 
+Thus, in the absence of a definite direction in the stock, arbitrage might help to per­
+petuate the inertia; but if there were truly a preponderance of investors wanting to 
+buy or sell the stock, these investors would totally dominate any arbitrage that might 
+be in progress. 
+RISK ARBITRAGE USING OPTIONS 
+Risk arbitrage is a strategy that is well described by its name. It is basically an arbi­
+trage - the same or equivalent securities are bought and sold. However, there is gen­
+erally risk because the arbitrage usually depends on a future event occurring in 
+order for the arbitrage to be successful. One form of risk arbitrage was described 
+earlier concerning the speculation on the size of a special dividend that an underly­
+ing stock might pay. That arbitrage consisted of buying the stock and buying the put, 
+when the put' s time value premium is less than the amount of the projected special 
+dividend. The risk lies in the arbitrageur's speculation on the size of the anticipated 
+special dividend. 
+MERGERS 
+Risk arbitrage is an age-old type of arbitrage in the stock market. Generally, it con­
+cerns speculation on whether a proposed merger or acquisition will actually go 
+through as proposed.