Fundamental relation between call and put
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In the picture below you can see a fundamental relation between a call and a put:
{{{ Buying share + Buying a put = Depositing the prevent value of the exercise price in the bank + Buying a call }}}
In human language this means that:
- Buying a call and saving the money of the exercise price
Is the same as
- Buying a put and buying the share
Other forms of this relationship are: {{{ Value of the put = Value of the call + Present value of exercise price - share price }}}
Buying a put is identical to:
- Buy a call
- Invest present value of exercise price in safe asset
- Sell share