buy write

E

emjroll

If an order comes in for a buy write or married put how do you calculate the synthetic call or put price?

For buy write to get synth put is it:
intrinsic + call value - carry?


And the married put:
intrinsic + put value + carry?


Thanks
 
married put = long stock + long put=synthetic long call.

thus: call=stock price - put strike + put value+interest-dividends

note that: interest component minus div is your cost of carry aka rc ( i.e. 'reversal/conversion').

e.g. stock 46.50, put strike is 40 and costs 0.60 to buy, rc is 0.1.
46.50 - 40 + 0.6+0.1=7.20=call premium (note call strike is 40)

buy write = long stock - call= - put
thus: short put=stock price-call strike-call value+rc.

e.g. stock 46.50, call strike 40 and premium for selling call 7.20.
short put=46.50-40-7.20+0.1= -0.60 (credit)

Cheers
db
 
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