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Math Help - Short question

  1. #1
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    Short question

    This question may sound simple, but I want to make sure that I understand the concept of portfolio value. I think that portfolio value contains the number of share times the price of share, the number of shares times the price of long call. But the number of shares times the price of short call is subtracted from the portfolio value.

    Also, I'm not sure about put options. I think that the number of shares times the price of short put is added to the portfolio value, but the number of shares times the price of long put is subtracted from the portfolio value.
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  2. #2
    GAMMA Mathematics
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    Quote Originally Posted by mhnsf22 View Post
    This question may sound simple, but I want to make sure that I understand the concept of portfolio value. I think that portfolio value contains the number of share times the price of share, the number of shares times the price of long call. But the number of shares times the price of short call is subtracted from the portfolio value.

    Also, I'm not sure about put options. I think that the number of shares times the price of short put is added to the portfolio value, but the number of shares times the price of long put is subtracted from the portfolio value.
    Calls and puts depend on a value of some asset, and in this case the asset are shares of stock. Using Put-Call parity ( C - P = PV(S - K)), buying a call (long) is just like selling a put (short). In either case, you want the value of the stock to be higher than the strike price. Does that help?
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