Add training workflow, datasets, and runbook
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The Intelligent Investor’s Guide to Option Pricing • 55
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would be more expensive than the following put option, which looks like
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this:
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5/18/2012 5/20/2013 249 499 749 999
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-
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10
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20
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30
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40
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50
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60
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70
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80
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90
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100
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Advanced Building Corp. (ABC)
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Date/Day Count
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Stock Price
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GREEN
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The former would be more expensive than the latter simply because the
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range of exposure for the first lies further within the BSM cone of prob-
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ability than the latter.
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We can extrapolate these lessons regarding calls and puts to come
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up with a generalized rule about comparing the prices of two or more op-
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tions. Options will be more expensive in proportion to the total range of
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exposure that lies within the BSM cone. Graphically, we can represent this
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rule as follows:
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This call option will be much less
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expensive…
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GREEN
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GREEN
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than this call option.
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