Did I write the opposite ?
There is no such a thing that an american digital replicated (hedged) with a spread. Narrow spreads mean huge slippage and costs effect...
Try this : Vol=30%, r=5%, spot=100, strike=100 dividend=0, maturity=365 days American call = 14.231 American put= 9.861 European...
Price it.
I didn't mention Alan, who is a perfect unknown individual for everybody here. What is important is not what Alan quotes, it is what Merton...
You need to understand something. A parity is composed by a call, you're right, and....a put. So yes there is no interest to exercise an...
Wrong. "It can be proved under essentially the same weak assumptions that the above put-call parity relation does not hold for American-style...
You've made a mistake. This rule about AAD that is about 0,8 sigma will hold just for a normal distribution. If stock prices or returns are not,...
This way a delta aroud 96% (deep in the money option), then it's 100%-96%=4% So 2*4%=8% chance of touch I agree it's very approximately :D
Hi MGJ, Don't forget that Black and Scholes model is priced under risk neutral probability. That means you expect the asset drift be the risk...
Hi Kevin What if the delta is about 52% ? :)
The opposite is true too, especially with derivatives.
I'm sorry but I can't believe it. :( I do trade long term options on several indexes, including on SPX. And for what I witness there is no such...
Dmo, Another way to look at negative interest rate is that you can't really lend and borrow money at the same rate as assume in the black and...
Hi Dmo, The reasoning is very simple to handle, but rarely shown and explained. So it's for you because the new year :D If negative...
Hi, Happy new year. Nitro, you're right but Dmo just can' t stop. As a former market maker, it's really weird that he never took a look at...
Hi Mark Happy new year. You wrote: " stocks do not have delta " Are you sure about that ?
Hi guys, European calls on non dividend stock futures are generally set like this: For a call C=exp(-rT)*(F*N(d1)-K*N(d2)) Where r...
So, a spread is a limited profit strategy? Dawn, I'm always the last who got the news here... I was kidding Mark ( there is a smiley, isn't).
Hi Crgarcia, Try this: Buy a call spread out of the money, sell a put spread out of the money, theta neutral/cost around zero. The risk...
Separate names with a comma.