Explain why the difference between put and call prices depends on whether or not the underlying security pays a dividend during the life of the contracts.
Answer to relevant QuestionsWhen comparing futures and forward contracts, it has been said that futures are more liquid but forwards are more flexible. Explain what this statement means and comment on how differences in contract liquidity and design ...It has been said that, from an investor's perspective, a long position in a call option represents the "good half" of a long position in a forward contract. Explain what is meant by this statement. Also, describe what the ...The common stock of Company XYZ is currently trading at a price of $42. Both a put and a call option are available for XYZ stock, each having an exercise price of $40 and an expiration date in exactly six months. The current ...Suppose you are a derivatives trader specializing in creating customized commodity forward contracts for clients and then hedging your position with exchange-traded futures contracts. Your latest position is an agreement to ...You are a coffee dealer anticipating the purchase of 82,000 pounds of coffee in three months. You are concerned that the price of coffee will rise, so you take a long position in coffee futures. Each contract covers 37,500 ...
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