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B.3.1 Correction

April 16th, 2008

In lesson B.3.1 the following relationship:

long position + purchased put = call option + borrow pv strike price

Should be:

 long position + purchased put = call option + lend pv strike price

Which makes complete sense b/c when you enter into a long position you pay money now (to buy the asset) and get money later (when you sell the asset), which is like lending money (pay money now and get money later).  A similar understanding yields:

 short position + purchased call = purchased put + borrow pv strike price

Since in a short position you get money now (from the short sale) and pay money later (when close the position), which the just like borrowing money (get money now and pay it back later).

James Errata

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