SK Hynix shares are currently trading at 33% premium on NASDAQ compared to KRX.
Short NASDAQ + Long KRX = free money
My example: 70 KRX shares - 700 NASDAQ ADR
Total margin impact: +$66k
Maximum profit: +$30k
Annual cost of shorting: $86k \* 2.28% = -$2k
Annual interest on net cash: $30k \* 3.5% = +$1k
Main risks:
* Brief premium spike due to difference in exchange trading hours. Let's say SKHY doubles overnight while KRX is sleeping. If I don't have enough portfolio value, it can result in a margin call.
* Lack of shortable SKHY shares - will increase the cost of shorting.
Thoughts?
