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Politics : Formerly About Advanced Micro Devices
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To: Petz who wrote (107969)4/26/2000 2:37:00 PM
From: Joe NYC  Read Replies (1) of 1570377
 
Petz,

1. say that call options are less valuable than they really are
2. say that put options are more valuable than they really are


Since there is a conversion between a call and a put, (I forgot what it is exactly) there is no way they can get out of line from each other, no matter how positive the uptrend is. I think it would open the door to arbitrage, which would bring puts and calls back to parity (except for slight premium of calls over puts due to the carrying cost of the hedge - which is basically the interest on money you have to borrow to buy the long position to hedge your short call)

For example, with stock at 85, the price of the 85 put has to be equal to the price of 85 call + interest on $85 for the duration of the call.

Joe
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