Question
When you looked at the newspaper quotes for options on ABC stock, you saw that a February call option with X=37.5 is priced at 6.375,
When you looked at the newspaper quotes for options on ABC stock, you saw that a February call option with X=37.5 is priced at 6.375, whereas the April call option with the same exercise price is priced at 6. Can you devise an arbitrage out of these prices? Do you have an explanation for the newspaper quotes?
Please answer both questions and provide details. Thank you.
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
15th edition
1337671002, 978-1337395250
