Did you know?!

I'm studying finacnial economics, so I am going to write one of the things I am studying about.

The change in the value of the call (N(d1)) and the change in the value of the put (N(d1)-1) partially offset each other because the call increases in value with the price of the underlying stock (ie it is more likely to payoff) and the put decreases in value (it is less likely to payoff)

Neat stuff huh?

Also, if you only goal was to hedge a long position in the DJIA, would you ever do that by going short both calls and puts as opposed to just shorting calls? You wouldnt because eaach unit of the portfolio costs more and you have to buy more of them in order to hedge your position.

pretty neat stuff huh?

Yeah, I'm in the class, and I still have no idea what it means,. I feel bad because I am being tested on this stuff tomorrow, andI could really care less about it. I know it is great information to know, but in all honesty, I want to own a plumbing company with my brother and build that. I want to have that lifestyle. I will hire someone who knows all this stuff to handle my money and make I am investing safe. So in that sense, I guess I really do not care that I am about to bomb one of my last important classes for my major. I should be trying a bit harder, I guess, but I really just do not want to know this stuff during my life, so I haven't apid attention all year. I don't see my last ditch study effort helping at all.....