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Today's editorial pick for you
Sony Stock Just Flashed a Hidden Arbitrage That Everyone is Missing
Posted On Dec 31, 2025 by Joshua Enomoto
Risk-tolerant speculators seeking a sophisticated wager that sits away from the current artificial-intelligence hype may consider Japanese multinational conglomerate Sony Group(NYSE:SONY). While the consumer electronics brand has struggled amid intense competition in the ecosystem, SONY stock has actually performed quite well, all things considered. Since the start of the year, the security has gained over 25%.
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Still, the spike in market value — which began in early August — has effectively been corrected away. In November, SONY stock was briefly trading hands above $30. Following the day after Christmas, SONY closed out the session at $25.82. In the trailing month, the security tumbled a hair over 12%, with many investors apparently securing profits ahead of the new year.
To be sure, Japanese equities have long represented a question mark so skepticism against SONY stock — one of the country's most iconic entities — isn't surprising. Amid the carnage, however, there may be a hidden arbitrage opportunity that retail traders (and even Wall Street professionals) are overlooking.
It's not that I have a profound opinion on SONY stock that no one else has thought of. Although I like to think of myself as reasonably intelligent, it's inevitable that, in the financial publication industry, every contributor — including yours truly — is downstream of price. To think otherwise would be irrational.
No, what I'm proposing is a dimensionality issue. By analyzing SONY stock in three-dimensional space, we can not only gain a better understanding of its pricing behaviors, but we can also identify mispriced trades that deserve careful inspection.
SONY Stock Exists as a Three-Dimensional Entity
Under the traditional paradigm, the equities market is treated as a two-dimensional concept, with price (on the y-axis) moving across time (x-axis). However, from a probabilistic standpoint, a price chart or an income statement is effectively zero-dimensional. That's because these pieces of information only tell you where price or value was realized; they don't natively tell you the likelihood of where the stock can go in the future.
While this point may arouse sharp criticism, here's the unavoidable reality. If, for instance, a technical price chart was predictive, then it would logically stand that any document that recorded historical events would also be predictive. That's an absurd claim that no one rational would make — so it stands to reason that price charts should also incur the same fault line.
Mathematically, it's unavoidable that SONY stock and any other security live in a three-dimensional probabilistic space: price value (state space), occupancy likelihood (density) and population (potential activity depth). In other words, traders want to know where the price can be, how likely the price is to arrive (at a certain point) and how frequently the price tends to populate that region.
Unfortunately, most traders focus on the single dimension of where the stock can end up. While a system focusing on that one dimension can be instructive, it would also make speculators blind to nuanced opportunities — such as the one present in SONY stock.
Let's consider a sports analogy. In Major League Baseball (MLB), opposing teams don't just scout pitchers for how fast they can throw the ball. That's an important component, but it's just a single factor. Instead, the analysis is deep, from spin rates to vertical and horizontal breaks to release point consistency and everything in between.
At the pro level, it's not enough to know what pitch is coming; the rotation and movement before the ball reaches the plate is what often determines whether a ball is struck hard and away or chops harmlessly to the shortstop.
My thesis, therefore, is simple. If you want to gain an edge in the market, you need to think three-dimensionally.
Uncovering Sony's Hidden Arbitrage
Earlier, I mentioned that there's a hidden arbitrage in SONY stock. To be clear, I'm not talking about the textbook form of the phenomenon, which is also known as spatial arbitrage. This term describes traders exploiting pricing variances of the same asset in different markets. For all practical purposes, spatial arbitrage is essentially impossible for retail traders, due primarily to speed and latency issues.
Besides, I work in the financial publication industry. Even if I were to miraculously find an example of spatial arbitrage, the opportunity would be whisked away.
So, rather than fight a losing battle, I'm focused on an orthogonal opportunity known as structural arbitrage. Here, the idea is that the market has priced options based on a "consensus" expectation, whereas I come in with a quantitative model to identify what could be the actual outcome.
Of course, I don't know for sure whether my projected actual outcome will be, in fact, realized or not. However, I make my projections based on the three dimensions of probability: previously observed price dispersion, outcome density and activity depth.
One of the key characteristics of my quantitative approach is to frame price action in a hierarchical structure. For example, if I took a single 10-week strand of SONY stock, the return during this period won't tell me anything about the probability of performance of the other weeks in the dataset. However, if we stacked hundreds of rolling 10-week trials in a fixed-time distribution, the most frequent behaviors would create bulges in probability mass.
These bulges represent risk geometry, which shows the ebb and flow of demand.
Now, we can move into a higher dimension with risk topography. Essentially, risk topography is a three-dimensional view of risk geometry, with the z-axis showcasing potential activity depth (PAD). Generally speaking, a debit-based trader gives up PAD in exchange for price exposure. What this means is that the trader is willing to accept exposure to an outcome that hasn't materialized yet in exchange for an asymmetric payoff if it does.
In many (if not most) cases, the PAD metric is quite light for the quantitative signal at hand. However, in SONY stock's case, PAD is quite robust.
Putting It All Together
Using data since January 2019, the aggregate 10-week performance of SONY stock would typically range between $25 and $28, with probability density peaking at $26.75 (assuming an anchor price of $25.82, Friday's close). However, we're interested in isolating for the current quant signal, which is the 3-7-D sequence. In the past 10 weeks, SONY printed only three up weeks, leading to an overall downward slope.
Under this setup, forward 10-week outcomes would typically range between $24.60 and $27.60, with density peaking at around $26.60. That would actually qualify as a negative structural arbitrage. However, the 3-7-D sequence's PAD metric is higher on a relative basis than the aggregate signal's PAD.
To make a long story short, prices are likely to occupy the price range between $26.50 and $26.75.
Given this projected occupancy load, the 25.50/27.00 bull call spread expiring Jan. 16, 2026, should be on your radar. While hitting $27 is an aggressive target, the breakeven price for this trade sits at $26.25. That's well inside the projected occupancy of SONY stock, meaning that this trade stands a solid chance of not losing money.
And if reflexive action causes SONY to rise through the second-leg strike at expiration? The payout comes out to 100%.
Disclosure: The author held a position in SONY stock.
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