tailieunhanh - Annuities and Other Retirement Products: Designing the Payout Phase (Directions in Development)_10

Tham khảo tài liệu 'annuities and other retirement products: designing the payout phase (directions in development)_10', tài chính - ngân hàng, ngân hàng - tín dụng phục vụ nhu cầu học tập, nghiên cứu và làm việc hiệu quả | 22 Conversions reversals boxes and options arbitrage 237 Here you could sell the 350 synthetic at and pay for the shares to create the conversion. At May expiry the short synthetic converts to a short shares position which pairs off against the long shares position. You have effectively sold the synthetic at 351 for a net credit of on the total position. This credit equals your cost of carry on the shares for the next 75 days as determined by the prevailing short-term interest rate per cent . Where applicable dividends are a negative component in the long synthetic just as they are with a futures contract. In this example there were no dividends through expiry. During the next 75 days the difference between the synthetic and the stock will converge from to zero. Long box The box is another spread that is occasionally employed by arbitrageurs in order to profit from small price discrepancies in the options markets. Again it contains minimal risk. If XYZ is at 100 you would go long the 100-105 box by going long the 100 synthetic and by going short the 105 synthetic. You would buy one 100 call sell one 100 put sell one 105 call and buy one 105 put. The box itself always trades for a price that nearly equals the difference between the strike prices in this case a debit of five. Your purchase holds its value until expiration at which time the synthetics pair off and you are credited with the difference between the strike prices. As an example consider the following set of May Marks and Spencer options with 75 DTE Marks and Spencer at May options with 75 days until expiry Table Marks and Spencer May options Strike 340 350 360 May calls May puts Here the long 340-360 box is calculated as the 340 call minus the 340 put minus the 360 call plus the 360 put or - - . Until expiry this debit is your total profit loss. 238 Part 4 Basic non-essentials At expiration the long .