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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study! -- Ignore unavailable to you. Want to Upgrade?

To: saket chadda who wrote (7192)	3/30/1998 7:35:00 AM
From: Herm	Read Replies (1) \| Respond to of 14162

Hi Saket, Thanks for taking the time to review the information and post your observations. If I recall, Doug was the one to post this research and calculations on how to determine parity. So, I will default to Doug to try to answer your question. The parity calculations is Greek to me and Doug is a much better mathematical programming guru. We do need you number crunchers out there on this forum and readers should always question the validity of data presented. There is always room for improvement and learning. Thanks Again!

To: saket chadda who wrote (7192)	3/30/1998 10:50:00 AM
From: Douglas Webb	Read Replies (1) \| Respond to of 14162

Let's see if I can figure out how my cgi calculates parity... There were some posts a few months ago on this thread where we spoke about a couple of ways to compute parity, and I described the algorithm I came up with. I'll bet you could find it using SI's search function down at the end of this page... Here's what my cgi appears to be doing: As it goes through all the options for a stock, it keeps two lists. One is the sum of Open Interest for each month/strike, and the other is the total Put OI for each month. (Saket, this first list is what you were looking at.) I then create a table for each month. The first column is the strike prices, from lowest to highest. The second column is the total OI for that month/strike (list #1). The third column is a running sum of the second column, starting with 0. The forth column is the second column, plus the third column, minus the total put OI for the month. The parity price for each month is the price where the forth column goes from negative to positive. From your example (with my column numbers): Strike(1) Call OI Put OI Total(2) (3) (4) 15 2000 1000 3000 0 -7700 20 100 5100 5200 3000 -2500 25 100 4600 4700 8200 2200 ----- 10700 The parity price is about 22.50. Doug.