# Put call parity for options on futures

I had a doubt on the Put call parity for options on futures in Schweser(Pg 276 Book 5). why does it say that the pure discount bond pays(X-F)at time T. why not just X?? and then again it says whether the option is in the money or out of the money the bond will always pay (X-F) am i missing something here ???

C+X/(1+Rf)^t = P + S S = F/(1+rf)^t

Good call on the formula cp Remember though, at initiation of the contract F = 0 for arbitrage pricing, but if you are going to engage in some arbitrage, you will STILL sell a forward or buy a forward at contract initiation For example C+X/(1+Rf)^t = P + S If the C+X/(1+Rf)^t is underpriced, you are buying P and the forward (as far as I remember)

a pure discount bond that pays X-Ft at expiration is a part of construct in derivation of put-call parity for futures (if you are using the portfolio construct to derive the parity). remember its and option on future (not on a stock) so even if the option is in or out of the money the bond will still pay X-Ft => there might be other payments involved from the option depending on whether its in or out of money but the bond will pay X-Ft, always.

thx guysâ€¦that helped