Question
Netflix Inc. (NFLX) currently trades for $500 a share. A 3-month at-the-money call option on NFLX trades for $25. All options are European and NFLX
Netflix Inc. (NFLX) currently trades for $500 a share. A 3-month at-the-money call option on NFLX trades for $25. All options are European and NFLX pays no dividends. The interest rate is 1% with continuous compounding.
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What is the adjusted intrinsic value of the 3-month call option?
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What is the no-arbitrage price of a 3-month at-the-money put option on NFLX?
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If the put option in (b) is trading for $24, is there an arbitrage opportunity and if so, what securities would you buy and/or sell to take advantage of it?
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The Option Trader Handbook
Authors: George Jabbour
2nd Edition
0470481617, 978-0470481615
