Theory v.s. reality: delta ??

[nitro]

Quote from Profitaker:

I hadn’t considered the case where options settle into futures contracts, and concede your point regarding the forward value of those options. However, the original Q related to DJX options, which (I assume) settle to cash, and to which my answer(s) relate.

"I am not interested in this detail or that detail. What I want to know is, did GOD have any choice when he created the Universe?" - Albert Einstein

Agreed. You could of course also take the implied synthetic future value for cash / stock settled options for months where no actual futures exist.

That is the point of what I said, but I don't think it was clear since I don't think you understand. You want the forward if the underlying expires into cash. Otherwise you need to compute an implied synthetic future if what the underlying expires to has time value.

Between us I think we have managed to complicate what was a fairly straight forward initial question.

Thanks for the link – some bedtime reading

YW

nitro

 

[Profitaker]

Quote from nitro:


That is the point of what I said, but I don't think it was clear since I don't think you understand. You want the forward if the underlying expires into cash. Otherwise you need to compute an implied synthetic future if what the underlying expires to has time value.

Then allow me to re-iterate....

For options that settle into cash or stock the futures value as traded in the market is a good approximation to the forward value. It's as near as damn-it.

Where no futures are traded in the month of options expiry you can derive the futures value from the implied synthetic in the options market, i.e. Call - Put + strike or Put - Call - strike.

The future / forward value of options that settle into futures can also be determined by using the implied synthetic method as above.

How's that ?