Can someone enlighten me on this. Why do an increase in carry benefit lower the value of call and increase the value of put. From a mathematical standpoint , I do get the intuition. But not from a logic,a standpoint. Doesn’t holding on to a stock that pays dividend has a higher benefit ?
You got it right. You have two instrumens related, to be valued with the no arbitrage approach, stock being the underlying of the call option.
If you receive dividends, perks or whatever it might be by holding the stock and Not with the derivative instrument, other things being equal, your call is overpriced and has to lower its price so the no arbitrage approach holds.
Hope it helps.
The logic behind it is that a dividend reduces the price of a stock. If there is a guaranteed price reduction when the dividend is paid, the value of the call will also be reduced.
The converse is true with a put. A guaranteed price reduction when the dividend is paid will increase the value of the put.