Question

Put Call Parity

Using the Apple (AAPL) option chain, the stock price is $226.82, the term is 45 days, estimate a risk-free rate (T-bill), use the 225 strike, use the bid/ ask mean quote call = $10.175. Using Put Call Parity solve for the put and please show all you work.

Answer 1

Solution.>

The put call parity is:

C + X * e^-r*t = P + S

Exercise price (X) : $225

Call option price (C) : $10.175

Put option price (P) : ?

Let us assume Risk-free rate (r) T-bill to be: 2%

Current market price (S) : $226.82

Time to maturity (t) : 0.125 year [ 45days/360days]

Let’s plug these values in the put-call parity equation:

10.175 + 225* e^(-2%*0.125) = P + 226.82

234.613 = P + 226.82

P = 7.793

Hence, Put Price = $7.793

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