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Strategies & Market Trends : Options 201: Beyond Obi-Wan-Kenobe
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To: Dan Duchardt who wrote (690)9/23/2002 11:23:05 AM
From: tyc:>  Read Replies (1) of 1064
 
Thank you for your reply, Dan.

Say you have two separate margin accounts, each having cash of $10,000 only.

In one, you buy a covered call. In the other, you sell the equivalent put.

I theorise; The excess margin in each account will be the same. And even with a change in the price of the underlying, the total values of the accounts will remain identical. Therefore the value of the short put must be identical to the value of the covered call.

It follows that the the same "return if exercised" (yield) applies to the short put as to the covered call. Of course, I am not referring to the exercise of the put, but rather the yield (of the account) if the put expires worthless or if the covered call is exercised.
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