Paul,
It is not a coincidence, there is a pattern to it. Whenever the stock price comes very close to a strike price, the prices of call and put options at that particular strike and for the same expirey tends to be the same - otherwise there will be arbitrage opportunities. W/o going into the mathematical proof and allowing for simplifications (spreads, dividends and interest rates ignored), the put-call parity equation is:
stock price - option strike = call price - put price (both for the same expirey and at the particular strike).
(For the proof as well as for other variations of this equations, you may check the book called Derivatives by Fred Arditi.)
This holds for any strike and any particular expirey date as long as that applies to both call and put options. When the LHS tends to 0, so does the RHS. Therefore, since DELL is around 75 now, Feb 75 calls should cost approximately the same as Feb 75 puts, so should Mays and so on. And you can use any pair to simulate margined equity prositions, the caveat being that the synthetic equity has the same life span as the option. Personally for a stock with strong upward I would like to choose the max life for the equity, hence I prefer to use the furthest term LEAPS for such positions (just as you did).
-Apratim. |
