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0
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1answer
29 views

American put option and rising interest rate

Will a rise in interest rate always result in a lower price of an American put option?
2
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1answer
103 views

How to hedge a put under the Black-Scholes model?

To hedge a call, one would invest the option price proceeds into $\Delta_t*S_t + B_t = c_t$. (ok) However, a put has negative delta, so I would short $\Delta_t*S_t$ and invest ...
2
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4answers
198 views

How to short an option?

It appears to me that retail investors can only buy calls and puts, but not short them through any standardized way (except maybe borrowing the option from a friend ;) ). Is that correct, or how can ...
2
votes
1answer
83 views

The role of Gamma in replicating a put

I am analyzing portfolio protection by replication of a put. Having my portfolio with value $V$ I could buy put giving me the payoff $P$ resulting in a call like pay-off scenario $C=V+P$. Say, I ...
1
vote
1answer
26 views

What is the strike of a short put that mimics a covered call

If I am long a stock $X$ which I purchased at $\$100$ and sold a covered call in the front month with strike $\$105$ for $\$2$ then is it true that the covered call is equivalent to a naked put at ...
0
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2answers
35 views

American put on a foreign currency

I know that For an American-style put option, early exercise is a optimal for deep in-the-money options. In this case, it may make sense to exercise the option early in order to obtain the profit ...
2
votes
1answer
85 views

How do I prove that $\lim_{K\searrow0}\frac{P(K,T)}{K} = \mathbb P(S_T=0)$?

I am trying to prove that $$\lim_{K\searrow0}\frac{P(K,T)}{K} = \mathbb P(S_T=0)$$ where $P(K,T)$ denotes the put option price with maturity $T$ and strike $K$ for some stock $S$. Assuming interest ...
5
votes
1answer
311 views

Why is the Put-Call Symmetry model dependent?

The put-call symmetry states that C(S,t;X,r,q) = P(X,t;S,q,r), and that this works for American options. According to my notes, this is 'model dependent' because it ...