684 Part V: Index Options and Futures 
pattern. Mispricing is, of course, a statistically related term; it does not infer anything 
about the possible validity of takeover rumors. 
A significant amount of discussion is going to be spent on this topic, because the 
futures option trader will have ample opportunities to see and capitalize on this mis­
pricing pattern; it is not something that just comes along rarely. He should therefore 
be prepared to make it work to his advantage. 
Example: January soybeans are trading at 583 ($5.83 per bushel). The following 
prices exist: 
Strike 
525 
550 
575 
600 
625 
650 
675 
January beans: 583 
Call 
Price 
191/2 
11 
51/4 
31/2 
21/4 
Put 
Price 
Suppose one knows that, according to historic patterns, the "fair values" of these 
options are the prices listed in the following table. 
Strike 
525 
550 
575 
600 
625 
650 
675 
Call 
Price 
191/2 
11 
53/4 
31/2 
21/4 
Call 
Theo. 
Value 
21.5 
10.4 
4.3 
1.5 
0.7 
Put 
Put Theo. 
Price Value 
1/2 1.6 
31/4 5.4 
12 13.7 
28 27.6 
Notice that the out-of-the-money puts are priced well below their theoretical 
value, while the out-of-the-money calls are priced above. The options at the 575 and 
600 strikes are much closer in price to their theoretical values than are the out-of­
the-money options.