Your not understanding.. Illiquid option market.Hes simply illustrating that instead of selling the option at a discount to parity,you may be able to buy stock and exercise at a more advantageous net price. In the example,it was a 2 dollar differential
A stock goes from 50 to 20 What is the put with a strike price of 50 worth? Sit down with a good option book instead of posting.
re: parity When explaining to an obvious beginner if you expect them to understand don't use jargon or a word that is used for an advanced concept.
Good post,but explain your thoughts on the following "That is why options traders often close their positions a week or so from expiration, while there is still enough extrinsic value in the option to mitigate assignment risk." Why is assignment a bad thing???
Well, if you want to own the underlying, it's not. But from what I've read, most net sellers of options seem to be interested in collecting premium and have no interest in owning the underlying. Not far enough into all this to take it any further than that.
I see where you are going with this.. But.....If you are already short an ITM put trading at parity,wouldn't you prefer to be assigned??? From a risk perspective,doesn't a short put trading at parity have the same risk as long stock,but with the embedded short call??? How do you create a synthetic long position ??
STFU....Troll seaon is over Guy is smart,willing to learn and I am pretty dam sure will pick it up pretty quickly