Question
5. You are looking at the NYSE trading board and at the same time CBOE Quotations. The Boeing Stock is currently trading for $40. You
5. You are looking at the NYSE trading board and at the same time CBOE Quotations. The Boeing Stock is currently trading for $40. You found out that one option seller is selling a Boeing Call option for $4 with the exercise rate of $ 48 and another option seller is selling the Boeing Put option for $3 with the exercise rate of $ 35. In both cases call and put are European that will expire in 5 months. See if you can find any arbitrage opportunity. If there is any, show the profit with Boeing stock price both in above and below exercise rate. Explain all the steps and scenarios. [Risk free rate 5%] (6 points)
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