Options, Put–Call Parities, and Option Strategies: Theory and Empirical Results

Cheng Few Lee and Wen-Chi Yeh

Chapter 107 in Handbook of Investment Analysis, Portfolio Management, and Financial Derivatives:In 4 Volumes, 2024, pp 3483-3546 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This chapter aims to establish basic knowledge of options and the markets in which they are traded. It begins with the most common types of options, calls, and puts, explaining their general characteristics, and discussing the institutions where they are traded. In addition, the concepts relevant to the new types of options on indexes and futures are introduced. The next focus is the basic pricing relationship between puts and calls, known as put–call parity. The final section concerns how options can be used as investment tools. An alternative option strategies theory has been presented. Excel is used to demonstrate how different option strategies can be executed.

Keywords: Financial Accounting; Financial Auditing; Mutual Funds; Hedge Funds; Asset Pricing; Options; Portfolio Analysis; Risk Management; Investment Analysis; Momentum Analysis; Behavior Analysis; Futures; Index Futures; CDCs; Financial Econometrics; Statistics; Financial Derivatives; Financial Accounting (search for similar items in EconPapers)
JEL-codes: G1 G11 G12 G3 M41 M42 (search for similar items in EconPapers)
Date: 2024
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