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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: Petz who wrote (107969)	4/26/2000 2:37:00 PM
From: Joe NYC	Read Replies (1) \| Respond to of 1570497

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

To: Petz who wrote (107969)	4/26/2000 6:39:00 PM
From: Dinesh	Read Replies (1) \| Respond to of 1570497

Petz: I think you have a point here. Not that the dynamic nature cannot be addressed by these models, but that the dynamic data is not easily available. Why, I have no clue. Lets pick a stock that's rising at the moment and priced at X dollars. Versus the same stock, on its way down at X dollars. An identical call is priced differently even when the expiration time difference is negligible. The BS model doesn't capture the difference. Either you need to run your own numbers - continually - for volatility or not bother too much with these models. What am I missing here ? Regards Dinesh