when is the … Call = Stock price? Put = Stock price? i would imagine if the stock were zero, then c=s=0 and the same for puts. any other scenarios?
A little clarification needed…Do you mean value of call/put or the strike price of call/put ? Also it is not necessary that if the stock (underlying) is zero the call/ put would be zero in real life. A call/put option is based on expectations as regards the price of the stock. I can buy a put option with a strike of $ 100 at a high premium, if I expect the stock to start recovering soon, or even buy a call if I expect the stock to increase substantially in price, even if the stock is currently trading very low or close to zero.
thanks for the clarification. i was referring the option value = stock price. so the only time i can think of option =stock is when the option has infinite life.
even if it had infinite life… not sure option price (which is the premium you pay) to take a position on the underlying… e.g. Call - you are paying a premium to take a position on an underlying stock, and expecting its price to increase. If you are going to pay a premium equal to stock price - you are defeating the whole purpose… typically (and even if you used the black scholes model equation) S0*N(d1) - X… etc. etc. N(d1) is a cumulative normal dist function < 1 and you are removing X * e^ (-rf*T) * (N(d2)) and N(D2) < 1, e^-rf*T is <=1 and since d2 < d1, so if S0 = X – you are going to get a smallish number… you definitely would not pay a huge price to get into such a position.