BONUS QUESTION (5 Points)

To earn credit you must show your work to support you decision. Otherwise no points!

Suppose you have a relative working for OIC (Option Industry Council). He knows you are taking derivatives class. He shows you the following from CBOE (Chicago Board Options Exchange) market data during the trading hours of the exchange. Strike Price $50 $55

Put Premium $7 $6 Is there any arbitrage opportunity for you?

[Hint: Think if any no-arbitrage property is violated? You know that if any no-arbitrage property is violated, it would lead to arbitrage! Also, look at the table on slide-04 of ch-10 lecture notes]

If no, Why?