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The following option prices were observed for a stock on July 6 of a particular year. Unless otherwise indicated, ignore dividends on the stock. The
The following option prices were observed for a stock on July 6 of a particular year. Unless otherwise indicated, ignore dividends on the stock. The stock is priced at 165.13. The expirations are July 17, August 21, and October 16. The risk-free rates are 0.0516, 0.0550, and 0.0588, respectively.
CALLS | PUTS | ||||||
STRIKE | JUL | AUG | OCT | JUL | AUG | OCT | |
155 | 10.50 | 11.80 | 14.00 | 0.20 | 1.25 | 2.75 | |
160 | 6.00 | 8.10 | 11.10 | 0.75 | 2.75 | 4.50 | |
165 | 2.70 | 5.20 | 8.10 | 2.35 | 4.70 | 6.70 | |
170 | 0.80 | 3.20 | 6.00 | 5.80 | 7.50 | 9.00 |
Check the following combinations of puts and calls and determine whether they conform to the putcall parity rule for American options.
a. July 155
b. August 160
c. October 170
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