This one is giving me fits. Can someone please explain… I know the formula put-call parity forward formula is as follows: Call + (X-F)/1+r = Put So if we rearrange for Value of Call don’t we get Call = Put - X/1+r + F/1+r So this is telling me to be long the put, short the bond, and long the forward right? But answer is Long forward, Long Put, and Long bond??? WTF am i missing?
I covered this issue in a post earlier today.
Thats exactly what i am looking at! I really dont get it too…
Will appreciate it if you can post the link…
Still can’t figure it out, but all i’m going to remember is that for a call when X>F, go long the put, long the forward and long the bond. If X
Oopps i stated this wrong: When F>X, go long the bond, if F