confused about the relationship between the faduciary call and covered call, may any one expain this? Appreciate very much for your time!
By definition: * Fudiciary call: is a combination of a bond that pay X at maturity and a short call *Covered call: is a combination of a long stock and a short call
Manke sense and many thanks!
Correction: * Fiduciary call: is a combination of a bond that pay X at maturity and a LONG call
Always remember put-call parity: Fiduciary call = protective put Fiduciary call = call + bond protective put = put + underlying (all long above)
The underlying concept is to make the two portfolio’s as arbitrage free…they are constructed using the principle that…if two portfolio’s have same CF s in future…then their PV should be same …