Put price from parity against a futures contract

Question

A futures contract trades at $110$ , and the call struck at $120$ on it costs $3$ . Ignoring discounting, what should the put with the same strike and expiry cost?

Short answer

$13$ . Parity on a future says $C-P=F-K$ , so $P=C-F+K=3-110+120=13$ ; the put is $10$ in the money and carries the same $3$ of time value as the call.

Adapted from QuantQuestions.io; question and answer rewritten by SelfMadeQuant.com.

See the hint and the full worked solution in the question bank (free account).

Open the worked solution

Lessons behind this question

Market Model and Risk-Neutral Valuation
Option Mechanics: Calls, Puts, Moneyness, Intrinsic Value, and Exchange vs. OTC Markets
Option Trading Strategies: Spreads, Combinations, and Payoff Engineering

Start with a free lesson: Options is part of a free topic. Create a free account, no card needed, to read it in full with worked solutions.

Read it free