Early unwinding of options-futures arbitrage with bid/ask quotations and transaction prices

By early unwinding of initial arbitrage positions simulated from bid/ask quotes and transaction prices, options-futures arbitrageurs can capture extra profits. Profits peak when arbitrageurs apply the dynamic early-unwinding strategy to the bid/ask quotes. Profits are at their lowest when arbitrageurs use the static hold-to-expiration strategy based on transaction prices. However, due to stale quotes, executing trades at prevailing bid/ask quotes can overstate both the size and frequency of arbitrage profits compared to transaction data for either the early-unwinding or the hold-to-expiration strategy.