Hmm.... I hate to show-off with mombo-jumbo. Noticed your post today. But folks who agree onto this or must get their Option 101 revisited, as, they do not understand Put-Call Parity. Although, in theory it does not exist for American Options but think deep, you will get it. IV% of Call or Put option is not same at a strike - one might live-off with OTM IV% as proxy for the IV% of that Strike but in real practical world they are not the same. Put-Call Parity Equation states: Code: P(t) + S(t) = C(t) + K.B(t,T) Where, P(t) is the value of the put of the same expiration date, S(t) is the spot price of the underlying asset, C(t) is the value of the call at time t, K is the strike price, and, B(t,T) is the present value of a zero-coupon bond that matures to $1 at time T. This is the present value factor for K. Notice L.H.S. of the equation is equivalent to Protective Put, isn't it? Now chime in the IV% to this equation. Can you any longer say Protective Put and a Naked Call are same? You are missing the "Risk-free interest" on the R.H.S. Similarly, Covered Call is not same as Writing Puts. None of you, so far, for even once mentioned risk-free Bond. That's why I mentioned Buffett is Buffett! That's all he did throughout his life - Covered Calls/Protective Puts. He did not just go and buy naked Calls as a replacement of Protective Put simply because the direction of their pay-off diagram matches. You CANNOT mitigate the risk by doing so. PERIOD. On one hand you have a Gambler and on the other you have a well hedged Trader or an Investor. Speculators fade away just like the wind. Yeah! This ignorance helps keep my mind clean and be consistent on my strategy. Happy to be ignorant than to be cluttered with clouds of over-confidence to take irrational decisions. You might call Options with whatever God-damn name that pleases you - whether it's synthetic, aesthetic butterfly or a dinosaur, at the EOD Greeks rule on the hindsight of Option fundamentals.
They are equivalent. If you buy the call (at a premium to the Protective Put), you get the interest on the excess cash equal to K.B(t,T)-K The K.B(t,T) is to compensate you for your carrying costs which you will incur throughout the duration of the trade. Thus they are equivalent. Buffent sold some puts a while back (but that was exploiting a specific situation in the long dated OTC market) but other than that he doesn't do covered calls nor protective puts as a core part of his investment strategy. Stop being so arrogant. It doesn't suit you when you say stupid things.
Ask yourself what happens to each, independently, when you raise rates or reduce the dividend. Right, Chimp! It’s magical! Rates only impact the natural call! lol. EQUIVALENCE (as in no inequality). Increase rates on the right and see what occurs on the left. Please... continue. But first go back to freshman year for Alg1. BWA hahahahahahaha. Sorry, but I cannot believe the guy came back for round 2. Still laughing, #tears
This jungle is dangerous! People teaching apples = apples then a monkey appears out of nowhere and argues that the left hand side is a banana? Wait, no. Now that I think about, I'm convinced. If it looks like an apple, tastes like an apple, has the same payoff diagram as an apple, is mathematically an apple: then it's definitely not an apple.