Using the data in the previous problem, suppose that 3-month put options with a strike price of

Question:

Using the data in the previous problem, suppose that 3-month put options with a strike price of $60 are selling at an implied volatility of 34%. Construct a delta-neutral portfolio comprising positions in calls and puts that will profit when the option prices come back into alignment.

Strike Price
In finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity. Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...