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SPY Initial Reference Value

Purchased Call Options

98% of the initial reference value is .98 x 267.88 dollars, which equals 262.52 dollars. However, the market value of each call contract they purchase is 247.42 dollars.

How are they purchasing these call options at a discount?

Here's the link to the prospectus (the reference value is on page 8, and the options price is on page 21): https://mplusfunds.com/defined-preservation-95-fund-fact-sheet-standard/prospectus-alaia-series-7-1-defined-preservation-95-fund-10-31-18/

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SPY pays dividends ~1.8%, and the expiry is ~3y (as of date was 2018, 2021 expiry), so the it looks like there is a discount

  • Assuming $0 time value

$$OptionValue=Intrinsic Value+Time Value $$ $$OptionValue= (S-K)-Dividend$$ $$OptionValue=267x(1-0.02)-267x1.8\%x3=\\\$247$$

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I suspect that the reference value is, well, only for reference and not the real price.

Maybe the price of SPY when the call contract is bought is lower

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