Synthetics

Discussion in 'Options' started by hajimow, Apr 21, 2006.

  1. Short.
     
    #21     May 1, 2006
  2. hajimow

    hajimow

    Thanks for your comments. I am trying to understand. I will get about $0.85 credit by selling PUT 32.5 and Call 35 and I will get 3.35 credit by selling Call 32.5 and PUT 35. Are $2 and $4.5 credits received from two versions of the trade? It should be 0.85 and $3.35 right? And you saying when you get $3.35 the risk is higher? I don't disagree with you,I just want to think about it and understand.
     
    #22     May 1, 2006
  3. My example is hypothetical. I didn't look at the actual prices. The risk of short assignment is higher on the $3250c/$3500p, but not much of an issue. The point is simply that they're identical in all respects, save for the assigment risk. Sell the otm strangle.

    $3.35 - $2.50 [strike differential] = $.85; reflects the extrinsic value of both strangles.
     
    #23     May 1, 2006
  4. hajimow

    hajimow

    Thanks. I learned something.
     
    #24     May 1, 2006
  5. Maverick74

    Maverick74

    You guys do know that there really is no winner when you are racing in the special olympics right? :D

    This thread has all the makings of a Jerry Lewis telethon. Laaaaaaaaady!

    Just kidding arb. :D

    Trying to teach synthetics to Hajimow is like trying to explain to Jessica Simpson what Chicken of the Seas is. Bwahahahaha.
     
    #25     May 2, 2006
  6. Thread split from GOOG thread.
     
    #26     May 2, 2006