Implied dividend and interest rate in put-call parity

Discussion in 'Options' started by the learner, May 28, 2018.

  1. cvds16

    cvds16

    this is extreme naive thinking: puts and calls are not priced the same way since 1987 ... that october a lot of market makers learned how naive that was ...
     
    #11     May 29, 2018
  2. cvds16

    cvds16

    you should use futures to derive dividend, intrest rate is practically nothing at this point in time
     
    #12     May 29, 2018
  3. cvds16

    cvds16

    derive the put call parity through the futures that way you don't need interest rates of dividends since they are allready priced into the futures
     
    #13     May 29, 2018
  4. Sorry I am not sure I get it.
    Suppose I am at the beginning of May and on the market I have options expiring in May and in June. I also have a future expiring in June (same day as options).
    When applying put-call parity for June's options, I can definitely use the future price instead of the underlying index and don't care about dividends. So as long as I have call and put prices for a given strike I can get the implied interest rate.
    But if I want to apply the put-call parity for May's options, are you saying I should still use June's future? Wouldn't take include also dividends that market expects to be paid between May and June's expiries?
     
    #14     May 29, 2018
  5. cvds16

    cvds16

    ah, sorry this detail escaped me. Nope you can't derive it from the June futures. However intrest rates should play a minimal part nowadays. look at several strikes and you'll will have a theoretical future of may so you will know the dividends that will arrive before that time.
    But you are way overthinking this ... there is nor practical use for what you are aiming to do, rest assured the market makes have things very much in line.
     
    #15     May 29, 2018
  6. I am not doing this in the hope to find arbitrages. I have a more practical need: I want to minimize the numbers of quotes I retrieve from markets.
    For a given strike I only want to get one quote (the OTM part, so for example put prices if market is trading above the strike). Then the same-strike call is derived by put-call parity without the need for me to get the market price.
     
    #16     May 29, 2018
  7. cvds16

    cvds16

    don't understand why you have that need but good luck with it ... not seeing the market seems to be asking for trouble ...
     
    #17     May 29, 2018