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You are a trader and you are looking at the stock price of Target that has prevailed today for $50. On the same day, two
You are a trader and you are looking at the stock price of Target that has prevailed today for $50. On the same day, two different option sellers are offering call and put options on Target Stock with a strike price of $48 that will expire after 3 months. The call offer is $3 and the Put offer is $2. On the same day, the T-Bill rate is 5%. Suppose you find an arbitrage opportunity and you are locked in. On the expiration day, The stock price is $40. Calculate the profit, if any. You must show detailed work for full credit.
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