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training_data/curated/text/03a5060445e7664e30e19e8eaff562250ba9fc3468b2383767df97dc7ef83faa.txt

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+682 Part V: Index Options and Futures 
+The real value in being able to use the options when a future is locked limit up 
+or limit down, of course, is to be able to hedge one's position. Simplistically, if a trad­
+er came in long the August soybean futures and they were locked limit down as in 
+the example above, he could use the puts and calls to effectively close out his posi­
+tion. 
+Example: As before, August soybeans are at 620, locked down the limit of 30 cents. 
+A trader has come into this trading day long the futures and he is very worried. He 
+cannot liquidate his long position, and if soybeans should open down the limit again 
+tomorrow, his account will be wiped out. He can use the August options to close out 
+his position. 
+Recall that it has been shown that the following is true: 
+Long put + Short call is equivalent to short stock. 
+It is also equivalent to short futures, of course. So if this trader were to buy a 
+put and short a call at the same strike, then he would have the equivalent of a short 
+futures position to offset his long futures position. 
+Using the following prices, which are the same as before, one can see how his 
+risk is limited to the effective futures price of 613. That is, buying the put and selling 
+the call is the same as selling his futures out at 613, down 37 cents on the trading day. 
+Current prices: 
+Option 
+August 625 call 
+August 625 put 
+Position: 
+Buy August 625 put for 19 
+Sell August 625 call for 31 
+August Futures 
+at Option 
+Expiration Put Price 
+575 50 
+600 25 
+613 12 
+625 0 
+650 0 
+Put 
+P/L 
++ $1,900 
+600 
+- 1,900 
+- 3,100 
+3,100 
+Last Sale 
+Price 
+19 
+31 
+Call Price 
+0 
+0 
+0 
+0 
+25 
+Call 
+P/L 
++$1,900 
++ 1,900 
++ 1,900 
++ 1,900 
+600 
+Net Change 
+for the Day 
+-21 
++16 
+Net Profit 
+or loss on 
+Position 
++$3,800 
++ 1,300 
+0 
+- 1,200 
+- 3,700