If you observed a put option trading at a price above its theoretical upper bound, what transactions must be entered today to capture the arbitrage profit on offer?

Select one:

Short the put option, then borrow enough money to buy the underlying stock.

Put-call parity means that we can only capture the arbitrage profit by trading the corresponding call option.

Borrow enough money from the bank to finance the short put.

Short the put option, short sell the underlying share and then invest the net proceeds from these two trades in the bank.

Short the put option and invest the proceeds in the bank.