If an order comes in for a buy write or married put how do you calculate the synthetic call or put price? For buy write to get synth put is it: intrinsic + call value - carry? And the married put: intrinsic + put value + carry? Thanks
married put = long stock + long put=synthetic long call. thus: call=stock price - put strike + put value+interest-dividends note that: interest component minus div is your cost of carry aka rc ( i.e. 'reversal/conversion'). e.g. stock 46.50, put strike is 40 and costs 0.60 to buy, rc is 0.1. 46.50 - 40 + 0.6+0.1=7.20=call premium (note call strike is 40) buy write = long stock - call= - put thus: short put=stock price-call strike-call value+rc. e.g. stock 46.50, call strike 40 and premium for selling call 7.20. short put=46.50-40-7.20+0.1= -0.60 (credit) Cheers db