Consider the September 2012 IBM call and put options in the Table -Ignoring the negligible interest you might earn on? T-Bills over the remaining few? days' life of the? options, show that there is no arbitrage opportunity using? put-call parity for the options with a $205 strike price.? Specifically:

a. What is your? profit/loss if you buy a call and? T-Bills, and sell IBM stock and a put? option?

b. What is your? profit/loss if you buy IBM stock and a put? option, and sell a call and? T-Bills?

c. Explain why your answers to (a?) and (b?) are not both zero.

Data Table IBM (INTL BUSINESS MACHINES) 206.36 2.59 Vol 3879539 Sep 13 2012 a 16:18 ET Bid 205.29 Ask 206.30 Size 1 x 1 Last Net open Puts Sale Bid Ask Vol Last Open Net Bid Ask vol int Calls Sale 12 sep 200.00 (IBM12221200-E 6.26 1.96 645 6.65 193 6898 12 Sep 200.00 (BM1222U200 E) 0.23 -0.42 019 022 946 3351 12 Sep 205.00 (IBM 12221205 E 2.35 1.14 2.36 2.49 1800 7390 12 Sep 205.00 (IBM1222U205 E) 1.10 -1.35 1.03 1.10 592 1184 12 Sep 210.00 (IBM 12221210 E) 0.32 0.15 0.36 0.42 508 2818 12 Sep 210.00 (BM1222U210 E) 4.15 -2.50 395 4.15 118 625 12 Sep 215.00 (IBM12221215 E) 0.06 0.03 0.04 0.08 36 1010 12 Sep 215.00 (IBM1222U215-E) 18.20 pC 8.60 8.95 0 36 12 Oct 200.00 (IBM 1220J200-E) 8.20 1.53 8.30 8.45 242 5786 12 Oct 200.00 (IBM1220V200-E) 2.04 -0.88 1.98 2.05 150 2646 12 Oct 205.00 (IBM1220J205-E) 4 85 1.05 4.90 5.00 382 8141 12 Oct 205.00 (IBM1220V205 E) 3.50 1.31 3.55 3.65 211 1335 12 Oct 210.00 (lBM1220J210-E) 2.36 0.58 2.45 254 186 7074 12 Oct 210.00 (IBM1220V210-E) 6.37 -1.54 6.05 6.20 35 1234 12 Oct 215.00 (IBM1220J215-E 1.11 0.36 1.04 1.10 115 3983 12 Oct 215.00 (IBM1220 215 E) 10.80 -990 965 9.75 5 238 Source: Chicago Board Options Exchange at www.cboe.com Print Done