Welcome to the Traders Laboratory.

Options Trading Laboratory Options traders discuss all your long and short term options trading here

Old 05-06-2015, 10:34 AM   #1

Join Date: May 2015
Posts: 1
Ignore this user

Thanks: 0
Thanked 0 Times in 0 Posts

Put/call Option Relation Exercice

Hi all,

I'm a total beginner and want to learn about trading. I've read some books and websites and found this one; the articles are really helpful!

While studying options, I've come across the following question and I don't know how to solve it:

Suppose you know the following:

- Future is at 66

- 70 strike straddle is trading at 27 

- 50-60 put spread is at 2.5 

- 50-60-70 put fly is at .2 

- Assume volatility is constant across strikes

Using the prices given and relationships between options of various strikes, what are the fair values for the 80 Call, 60 Straddle, and 40 Put? Assume we had a volatility smile among the curve, how would this make your markets different?

Here is what I think: let's denote by p(K) and c(K) the put and call with strike K (assume sigma, time to maturity T, risk free r are constant and the same for all options). We know that


We also know that put-call party holds, i.e. c+K e^(-r*T)=p+S_0 and the price of the forward F=S_0*e^(r*T)=66.

From this information how do I compute c(80), p(40) and p(60)+c(60)? What do they mean by "relationships between options of various strikes"?

switchOx is offline  
Reply With Quote


call put parity, options, relationships

Thread Tools
Display Modes Help Others By Rating This Thread
Help Others By Rating This Thread:

Similar Threads
Thread Thread Starter Forum Replies Last Post
Call Option Definition Igor Trading Dictionary 0 01-29-2014 02:00 PM
Asset-Or-Nothing Call Option Definition Igor Trading Dictionary 1 12-23-2013 06:57 PM
Interest Rate Call Option Definition Igor Trading Dictionary 0 08-25-2013 02:27 PM
Call Option Igor Options Basics 0 01-04-2012 05:59 PM
Relation Between Daytraders and Time ptcman Day Trading and Scalping 10 12-06-2010 03:05 PM

All times are GMT -4. The time now is 10:21 AM.
Copyright ©2000 - 2018, Jelsoft Enterprises Ltd.
CS to VB integration by DeskLancer
2006-2011 Traders Laboratory, All Rights Reserved.