Also. Shouldn't he be shorting the forward and buying the underlying It should be a short forward position combined with a buying the underlying Like he himself said in the beginning of the video
Yup! Even though this reply is a little bit late, I hope it can still be useful: for forwards/futures, you just entre the contract with no upfront payment, and signing the contract means that you have the OBLIGATION of selling/buying the underlying asset at maturity. However, for options, you do have to pay for the price of it, and it is not a contract, you have the RIGHT BUT NOT OBLIGATION to buy/sell the underlying asset at maturity.
It's so easy to understand. it helps me a lot. Thank you for your great explanation.
you have to pay a premium to short a forward contract therefore there must be cash outflow at t=0.
Only put and call options need premiums, not forwards.
Interesting, short and clear!
Wow, too good
7:01 Shouldn't it be the investor agrees to buy, not sell, the stock at $103 one year later? 😂
Thank God. I thought I was the only one.
Also. Shouldn't he be shorting the forward and buying the underlying
It should be a short forward position combined with a buying the underlying
Like he himself said in the beginning of the video
simple and clear. thank you !!!!
You're welcome!
Nice graphics
best explanation ....
short forward at t=0, just meaning the positin, not meaning really 'selling forward', correct? the selling forward only happens at t=T? thanks!
Yup! Even though this reply is a little bit late, I hope it can still be useful: for forwards/futures, you just entre the contract with no upfront payment, and signing the contract means that you have the OBLIGATION of selling/buying the underlying asset at maturity. However, for options, you do have to pay for the price of it, and it is not a contract, you have the RIGHT BUT NOT OBLIGATION to buy/sell the underlying asset at maturity.
really good content
Very helpful!!
i wish i can give a hundred likes👌
What always got me about this is that its all based on the risk free rate. But who can actually borrow at the risk free rate?
well, If you bought t bills you pretty much borrowed at the risk free rate
@@mustafael-dardeery4804 you lend when u buy t bills...not borrow
Nicely explained