Forward conversion with options..

[BaseballRedhawks]

So the forward conversion with options.. you buy a put and sell a call with the same strike price on the shares…
Why is there no counterparty risk? When you buy a put… you have the right to sell somehting at a future price…. but your counterparty might not pay you for it….
Right?
Thanks and happy friday!

 

[FrankCFA]

BaseballRedhawks wrote:
So the forward conversion with options.. you buy a put and sell a call with the same strike price on the shares…
Why is there no counterparty risk? When you buy a put… you have the right to sell somehting at a future price…. but your counterparty might not pay you for it….
Right?
Thanks and happy friday!

OTC option: You still have counterparty risk
Exchange listed option: No counterparty risk