QuantMax

OPT

Options: fundamentals and arbitrage

Payoffs, parity, early exercise and the static arbitrage constraints a market maker must never violate.

  1. 1

    Payoffs and bounds

    Calls and puts, moneyness, intrinsic and extrinsic value, and the no-arbitrage bounds with the trades that enforce them.

  2. 2

    Put–call parity

    Derivation by replication, the dividend and futures variants, and the conversion and reversal trades.

  3. 3

    Strategies

    Spreads, straddles, butterflies, condors, calendars, risk reversals and collars — and when a trader reaches for each.

  4. 4

    Static arbitrage constraints

    Spread bounds, butterfly non-negativity and calendar constraints on a quoted surface.

  5. 5

    Structural and corporate

    Dividends, adjustments, borrow, pin risk and assignment mechanics.