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I am using the Robinhood app and see call options with breakeven prices below the current stock price.

Is there a reason why you wouldn't just buy this option and then sell it off immediately afterward?

Here is what I saw:

Current Price = $3.24

Strike Price = $3

Break Even = $3.12

Contract Price = $0.12

Why couldn't you buy this and then sell it immediately if your breakeven price is below the current stock price? Would you make the difference in profit?

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If those are the respective real time quotes then yes, you could do a Discount Arbitrage (buy call, exercise call to acquire stock, and sell stock. To avoid slippage, you'd buy a Synthetic Put via a Combo Order (buy the call and short the stock) and then exercise the call to close the position.

The reality of these 'free lunch' situations is that:

  • you're probably not evaluating this based on the respective bid and ask prices, or

  • you're looking at the last trade's price (the quote is stale), or

  • it's bad data
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