How does the amount the investor expects to pay

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Reference no: EM131956749

An investor plans to purchase a put option on one unit of an underlying asset. The option expires in one year. The strike price on the put is equal to the 1-year forward price for the underlying asset.

The investor also plans to simultaneously write a 1-year call option on one unit of the same underlying asset. The strike price on the call option will also equal the 1- year forward price on the underlying asset (and the strike price on the put option).

How does the amount the investor expects to pay for the put option compare to the amount the investor expects to receive from writing the call option? Explain or demonstrate.

Reference no: EM131956749

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