(a) State the put-call parity, and use it to show the almost equivalence of the profit diagrams...
Question:
(a) State the put-call parity, and use it to show the almost equivalence of the profit diagrams between a long call and the combination (a long stock & a long put). Assume that each option contract concerns one share of the stock only
(b) The 300ETF closed at 4.146 on Mar 16th 2022. The information about the 2206 300ETF options is given in Figure 2. There are 98 natural days left.
(i) It is often the practice that the at-the-money call's IV is used to calculate the mathematical probabilities implied by IV. State this IV.
(ii) The market price of the K = 4.1 call is 0.2175. Interpret this price from the seller's point of view.
(iii) If you buy the K = 4.1 call, use the IV in (i) to assess the probability of you making money on the maturity date. Remember to take into account of the cost of the option.