You are an options dealer who deals in non-publicly traded options. One of your clients wants to
Question:
You are an options dealer who deals in non-publicly traded options. One of your clients wants to purchase a one-year European call option on HAL Computer Systems stock with a strike price of \($20.\) Another dealer is willing to write a one-year European put option on HAL stock with a strike price of \($20,\) and sell you the put option for a price of \($2.50\) per share. If HAL pays no dividends and is currently trading for \($18\) per share, and if the risk-free interest rate is 6%, what is the lowest price you can charge for the call option and still guarantee yourself a profit?
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Fundamentals Of Corporate Finance
ISBN: 9780137852581
6th Edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
Question Posted: