HOLLYWOOD STOCK EXCHANGE
THE ENTERTAINMENT MARKET
THE ENTERTAINMENT MARKET
Here is my .02 I will use a fictional MOVIE with a strike of 20 which means
that if you buy the call at 2, you are hoping it makes more than 22. If you buy the Put at 2 (IPO) you are hoping that it will make less than 18. (ignoring the commission)
If you short the call, you are hoping it makes less than 20 and if you short the Put, you are hoping it makes more than 20.
These are not mutually exclusive events. A win on the purchase of a call, also is a win on the short of the put, since greater than 22 is also greater than 20. A win on the purchase of a Put, is also a win on the short of the Call, since less than 18 is also less than 20.
Generally, if you think that MOVIE will do better than the strike, and you can afford the action, you long (buy ) Call and short the Put. If you think that MOVIE will do Less than the strike, you buy the Put and short the Call.
In virtually every pairing, one of them delists at zero, and the other is greater than zero, and hopefully, greater than 2. The trick is to guess the zero and be doing it correctly more often than incorrectly.
NOTE Occasionally, the movie delists within 2 of the strike price, and you lose on both the put and the call. You could short them both, but that is REALLY risky, unless it is a strike of 5.
what good does it do to hold 10,000 of both a call and put? {nm} Dec 13, 12:26
Well...as you know...a Call is betting that a movie will earn MORE than the strike price...a Put is just the opposite... Dec 13, 12:54
That is true... Dec 13, 15:51
Here is my .02 I will use a fictional MOVIE with a strike of 20 which means Dec 15, 09:16
NB....in the last sentence replace "delists" with "Opens" (Terminology !) {nm} Dec 15, 09:45
sorry, but your analysis is slightly wrong Dec 15, 10:17
prebious = previous {nm} Dec 15, 10:17
