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+766 Part VI: Measuring and Trading Volatility 
+(2) Put TVP = Put price - Strike price + Stock price 
+The arbitrage equation, (1), can be rewritten as: 
+(3) Put price - Strike price+ Stock price= Call price+ Dividends - Carrying cost 
+and substituting equation (2) for the terms in equation (3), one arrives at: 
+( 4) Put TVP = Call price + Dividends - Carrying cost 
+In other words, the time value premium of an in-the-money put is the same as the 
+(out-of-the-money) call price, plus any dividends to be ea med until expiration, less 
+any carrying costs over that same time period. 
+Assuming that the dividend is small or zero (as it is for most stocks), one can see 
+that an in-the-money put would lose its time value premium whenever carrying costs 
+exceed the value of the out-of-the-money call. Since these carrying costs can be rel­
+atively large ( the carrying cost is the interest being paid on the entire debit of the 
+position - and that debit is approximately equal to the strike price), they can quickly 
+dominate the price of an out-of-the-money call. Hence, the time value premium of 
+an in-the-money put disappears rather quickly. 
+This is important information for put option buyers, because they must under­
+stand that a put won't appreciate in value as much as one might expect, even when 
+the stock drops, since the put loses its time value premium quickly. It's even more 
+important information for put sellers: A short put is at risk of assignment as soon as 
+there is no time value premium left in the put. Thus, a put can be assigned well in 
+advance of expiration even a LEAPS put! 
+Now, returning to the main topic of how implied volatility affects a position, one 
+can ask himself how an increase or decrease in implied volatility would affect equa­
+tion ( 4) above. If implied volatility increases, the call price would increase, and if the 
+increase were great enough, might impart some time value premium to the put. 
+Hence, an increase in implied volatility also may increase the price of a put, but if the 
+put is too far in-the-nwney, a modest increase in implied volatility still won't budge 
+the put. That is, an increase in implied volatility would increase the value of the call, 
+but until it increases enough to be greater than the carrying costs, an in-the-money 
+put will remain at parity, and thus a short put would still remain at risk of assignment. 
+STRADDLE OR STRANGLE BUYING AND SELLING 
+Since owning a straddle involves owning both a put and a call with the same terms, 
+it is fairly evident that an increase in implied volatility will be very beneficial for a 
+straddle buyer. A sort of double benefit occurs if implied volatility rises, for it will