A European call option and put option on a stock both have a strike price of $20 and an expiration date in 3 months. Both sell for $3. The risk-free interest rate is 10% per annum. Current stock price is $19. Identify the arbitrage opportunity open to a trader.
A European call option and put option on a stock both have a strike price of $20 and an expiration date in 3 months. Both sell for $3. The risk-free interest rate is 10% per annum. Current stock price is $19. Identify the arbitrage opportunity open to a trader.
Related questions
9)
A European call option and a European put option on a stock both have a strike price of $45 and expire in 6 months. Currently, the call price is $10 and the put price is $5 in the market. The risk-free rate is 2% per annum, and the current stock price is $50. Identify the arbitrage opportunity open to the trader. All the interest rates are with continuous compounding.
| a) Buy call, sell put, sell stock | ||
| b) Buy call, sell put, buy stock | ||
| c) Sell call, buy put, buy stock | ||
| d) Sell call, buy put, sell stock |
