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A stock with stock price $38 has a call available on it, with premium of $7. The strike price is $40 and expiration is 300
A stock with stock price $38 has a call available on it, with premium of $7. The strike price is $40 and expiration is 300 days from today. The stock also has a put with the same strike price and expiration as the above call, available for a put premium of $6. Both options are European, there are no dividends paid on the stock, and the interest rate for the expiration period is 13% per year. Which strategy below demonstrates arbitrage:
buy the put, buy the call, sell stock, sell a bond | ||
buy the stock, buy the bond, write the put, write the call | ||
buy the call, buy a bond, write the put, sell stock | ||
buy a put, buy stock, write the call, sell bond | ||
no arbitrage is available for these asset prices |
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