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Strategies & Market Trends : Waiting for the big Kahuna
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To: Brad Bolen who wrote (29661)10/1/1998 5:03:00 AM
From: Moominoid  Read Replies (1) of 94695
 
One way to think of a put option is having a short position on margin with a stop loss order. On the short you have to pay interest on the borrowed money and use lose a more or less predetermined amount (ignore gapping Black-Scholes did and won the Nobel Prize <g>) if the stop loss triggers. On the option the time erosion is equivalent to interest on your much larger leverage.

I don't know if this is really right but it kind of makes sense to me.

In other words they are equivalent in some sense.

David
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