7. Arbitrage and Options (LO2, CFA3) You notice that shares of stock in the Patel Corporation are going for \($50\) per share. Call options with an exercise price of \($35\) per share are selling for

\($10\). What’s wrong here? Describe how you could take advantage of this mispricing if the option expires today.

Use the following options quotations to answer Questions 8 through 11:

Option &

N.Y. Close Strike Price Expiration Calls Puts Vol. Last Vol. Last Milson 59 55 Mar 98 3.50 66 1.06 59 55 Apr 54 6.25 40 1.94 59 55 Jul 25 8.63 17 3.63 59 55 Oct 10 10.25 5 3.25