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Strategies & Market Trends : Options -- Ignore unavailable to you. Want to Upgrade?

To: taxman who wrote (1348)1/19/2000 11:01:00 PM
From: Bridge Player  Read Replies (1) | Respond to of 8096
 
<< well let me put it this way. these two positions are equal:

1 short the put

2 long the underlying and short the call >>

Perhaps it would be better to say: "These two positions are equal, in terms of the risk of loss resulting from price movements of the underlying stock, assuming that the put and the call both have the same strike price and expiration, and that the amount of premium received in either case is the same." There are several obvious aspects in which they are not exactly equal.

 Is this what is meant? Verbose though it is, I am fairly sure that even this statement is not complete or totally correct and that someone might want to take issue with it.

This is not meant as nitpicking criticism but simply a suggestion for greater clarity. Option esoterica is hard enough to grasp and understand without risking oversimplification.

BP



To: taxman who wrote (1348)1/20/2000 10:20:00 AM
From: Jill  Read Replies (2) | Respond to of 8096
 
I don't see them as equal because their consequences are different. long the underlying and sell calls, you can lose your underlying and keep only the premium. short the underlying, you get a premium or you get stock. int he former scenario you either end up with premium or less/no stock. in the latter you either end up with premium or some/more stock.

your goals for the two are very different when you set those two types of positions.


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