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training_data/curated/text/9e526c6f43e8d55ff57505187298cb2a2077fe663bbc599afe94f3c6fbaf3271.txt

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+A trader with this position is synthetically long the stock at $60 and short
+the stock at $70. That sounds like $10 in the bank. The question is: How
+much would a trader be willing to pay for the right to $10? And for how
+much would someone be willing to sell it? At face value, the obvious
+answer is that the equilibrium point is at $10, but there is one variable that
+must be factored in: time.
+In this example, assume that the October call has 90 days until expiration
+and the interest rate is 6 percent. A rational trader would not pay $10 today
+for the right to have $10 90 days from now. That would effectively be like
+loaning the $10 for 90 days and not receiving interest—A losing
+proposition! The trader on the other side of this box would be happy to
+enter into the spread for $10. He would have interest-free use of $10 for 90
+days. That’s free money! Certainly, there is interest associated with the cost
+of carrying the $10. In this case, the interest would be $0.15.
+This $0.15 is discounted from the price of the $10 box. In fact, the
+combined net value of the options composing the box should be about 9.85
+—with differences due mainly to rounding and the early exercise possibility
+for American options.
+A trader buying this box—that is, buying the more ITM call and more
+ITM put—would expect to pay $0.15 below the difference between the
+strike prices. Fair value for this trade is $9.85. The seller of this box—the
+trader selling the meatier options and buying the cheaper ones—would
+concede up to $0.15 on the credit.
+Jelly Rolls
+A jelly roll, or simply a roll, is also a spread with four legs and a
+combination of two synthetic stock trades. In a box, the difference between
+the synthetics is the strike price; in a roll, it’s the contract month. Here’s an
+example:
+Long 1 April 50 call
+Short 1 April 50 put
+Short 1 May 50 call
+Long 1 May 50 put