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You are an options dealer who deals in non-publicly traded options. One of your clients wants to purchase a one-year European call option on Alpha
You are an options dealer who deals in non-publicly traded options. One of your clients wants to purchase a one-year European call option on Alpha Computer Systems stock with a strike price of $20. Another dealer is willing to write a oneyear European put option on Alpha Computer stock with a strike price of $20, and sell you the put option for a price of $4.00 per share. If Alpha Computer pays no dividends and is currently trading for $18 per share, and if the risk-free interest rate is 6%, what is the lowest price you can charge for the call option and still guarantee yourself a profit
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