You’ve solved one equation with one unknown a million times. For example:
$20 - 2 * $8.99 = X
where:
X = how much change you are owed after handing over an Andrew Jackson for 2 hot dogs at Wrigley Field.
In finance, this uneventful operation is dressed up with the word “implied”. Fix all the observable inputs to an option price and back out an “implied volatility”.
We imply lots of values. The probability of TSLA expiring below $250 by December 2025, “breakeven inflation”, or as my fundamen
A reminder in the spirit of being attuned to seemingly far-fetched risks:
If short selling were restricted in any way, the value of puts relative to calls on the same strike increases in a put-call parity framework.
Another way to say this is being long stock is more valuable since only long sellers can sell. If puts increase relative to calls on the same strike, as they do when borrow costs increase, that is like a synthetic future on the stock trading at a discount to the stock price.
Simil
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