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Put option: A put option gives its buyer the right, but not the obligation, to sell a stock at the strike price prior to the expiration date. When you buy a call or put option, you pay a premium ...
The intrinsic value is the difference between the underlying spot price and the strike price, to the extent that this is in favor of the option holder. For a call option, the option is in-the-money if the underlying spot price is higher than the strike price; then the intrinsic value is the underlying price minus the strike price.
In the financial world, options come in one of two flavors: calls and puts. The basic way that calls and puts function is actually fairly simple. A call option is a contract giving you the right to...
Note that from the formulae, it is clear that the gamma is the same value for calls and puts and so too is the vega the same value for calls and puts options. This can be seen directly from put–call parity, since the difference of a put and a call is a forward, which is linear in S and independent of σ (so a forward has zero gamma and zero ...
Put–call parity is a static replication, and thus requires minimal assumptions, of a forward contract.In the absence of traded forward contracts, the forward contract can be replaced (indeed, itself replicated) by the ability to buy the underlying asset and finance this by borrowing for fixed term (e.g., borrowing bonds), or conversely to borrow and sell (short) the underlying asset and loan ...
This makes put-call parity an essential concept in options trading. The term describes a functional equivalence between a put option and a call option for the same asset, over the same time frame ...