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Trading Strategies Involving Options

Trading Strategies Involving Options

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Published by Venkatesh Swamy

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Categories:Types, School Work
Published by: Venkatesh Swamy on Mar 30, 2010
Copyright:Attribution Non-commercial

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04/09/2013

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LECTURE 6-7
Trading Strategy InvolvingOptions
 
Pu
t-Call
P
arity 
y
Consider a portfolio: Holding one p
u
t, one
u
nit of the
u
nderlying asset, and selling one call.
y
P
ortfolio val
u
e:
y
 At expiration date,---if , we have,---if , we have,
y
Given for certain, we m
u
st also have,
)0,max()0,max(
 pc
 K  K  P  P 
!!
 K 
"
 K 
!!
)(
 K 
!
 K 
!!
)(
 K 
  
!
Ke
!
 
Pu
t-Call
P
arity 
y
The relationship between the val
u
e of a call and a p
u
tm
u
st be,
y
 At time zero,
y
Example:
P
c=£5, K=£45, S0=£40, T=9/12, r=5%Q: what is
P
p?
Ke P 
 p
 P 
c
!
c p
Ke P  P 
!
0

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