a,,pter 15: Put Option Basics 255 
option market, it was often stated that the reason for this relationship was that the 
demand for calls was larger than the demand for puts. This may have been partially 
true, but certainly it is no longer true in the listed option targets, where a large sup­
ply of both listed puts and calls is available through the OCC. Arbitrageurs again 
serve a useful function in increasing supply and demand where it might not other­
wise exist. The second fact concerning the relationship of puts and calls is that a put 
option will lose its time value premium much more quickly in-the-money than a call 
option will (and, conversely, a put option will generally hold out-of-the-money time 
value premium better than a call option will). Again, the conversion and reversal 
processes play a large role in this price action phenomenon of puts and calls. Both of 
these facts have to do with the carrying costs involved in the conversion. 
In the chapter on Arbitrage, exact details of conversions and reversals will be 
spelled out, with specific reasons why these procedures affect the relationship of put 
and call prices as stated above. However, at this time, it is sufficient for the reader to 
understand that there is an arbitrage process that is quite widely practiced that will, 
in fact, make true the foregoing relationships between puts and calls.