PTT Exploration (OTCPK: PEXNY) stock has moved 400% on the OTC markets, as we've already pointed out. There are several different quotes for PTT Exploration stock. Those other quotes haven't moved. Therefore there's an arbitrage opportunity here. Or, as we can also put it, there's some free money here. And if they're giving out free money it would be churlish of us not to turn up for our share.
Exactly how you can do this will depend upon your broker. What will they allow you to do? American citizens or residents might find it harder to trade in foreign stocks, just as one example. So, all we can do is sketch out the opportunity.
As we've already said this morning about PEXNY, that OTC stock has moved wildly. On no news, we assume it's just some burst of speculation. We also showed that the Thai quote, PTTEP hasn't moved.
PTT Exploration from NASDAQBut there are also two other quotes. One OTC:
PT Exploration stock price from NASDAQ
This has near no liquidity, the last trade was in June. There's also the Singapore ADR:
PTT Exploration Singapore ADR stock price from SGXThere's not much liquidity here either but people do seem willing to quote at least in 10k volumes.
Note that the four different quotes are not exactly the same instrument. PEXNY is one OTC quote in the US, PTXLF is another (broker sponsored we assume). TPED is the Singapore ADR and PTTEP is the source Thai stock. The one instrument whose price has moved out of line is that PEXNY quote in New York. That's the one that was up 400% yesterday (to then fall back after hours).
As they're not exactly the same instrument then they will be of varying degrees of fungibility with that PEXNY OTC stock. That is where the trickiness comes in - what can be delivered and what has to be held as one leg of the two footed stance? But over time all these price quotes should move in something like lockstep. Thus there's free money to be had in buying one of the three that hasn't soared while selling into the one that has jumped those hundreds of percent.
Note that this is an arbitrage, it is not a stock recommendation. We have no view at all on PTT Exploration as a company. It simply is true that the prices of the four instruments should follow each other. One of them not doing so is an arbitrage opportunity. How much of an opportunity depends upon liquidity and fungibility across the different instruments.
It also seems fairly obvious to us that the liquidity in PEXNY isn't all that great either. Hundreds of pieces of stock without moving the price too much, probably, thousands of pieces at a time probably not.
The risks are around that fungibility - what can be delivered against PEXNY positions. So, that's the thing to find out. Because given current prices there really is free money on offer here.
