Another easy money strategy

Actually need to add-in the difference between strike and underlying at the time of going long.

Break-even is;

$ 75+ (76.30-75.00)/2 = $ 75.65

$ 75.65 – ($ 15.10 + $ 10.80)/2 = $ 62.70

 

No you don't. The synth takes into account the spot price the thread starter mentioned, provided those quote were indicative as quoted.

 

I agree the synthetic equivalent, but not his break-even. It's $ 62.70, see above.

Not $ 64.20.

 

No it doesn't. Run a practical example and you'll see it.

 

C'mon Profit. Any combination of the stock/call synthetic is going to equal its natural equivalent. They're 100% fungible under all terms.

Whatever credit is received on the natural put will be equal to the stock/call combo-credit; if not, there is an arbitrage via replication. Therefore, look to the nautral put at 10.80 to price the synthetic. If the put is trading at $10.80 then the synth is trading at $10.80 as well. Exclude execution variance.

 

They have to carry the same PnL distro -- that's the defintion of equivalence.

 

But that's approx the modeled forward rate I see here in bloomberg. The conversion carries rho-risk; so an increase in FI rates is a negative.

 

Oops, as other posters have suggested my break-even figure is wrong. My revised figure is $62.7 as Profitaker has already stated.

Investment =-76.3+15.1+10.8=-50.4
At expiration Call =0, Put=-12.3, Stock=62.7
Value at expiration =+0-12.3+62.7=50.4 (equals investment above)

Hence 62.7 is break even.

 

What is the b/e at expiration if selling two puts?

 

I know , I was just having fan posting "free' risk trade sample