Question

A European call option on a stock with a strike price of $50 and expiring in six months is trading at $14. A European put option on the stock with the same strike price and expiration as the call option is trading at $2. The current stock price is $60 and a $1 dividend is expected in three months. Zero coupon risk-free bonds with face value of $100 and maturing after 3 months and 6 months are trading at $99 and $98, respectively. Identify the arbitrage opportunity open to a trader.

Answer #1

A European call option on a stock with a strike price of $50 and
expiring in six months is trading at $14. A European put option on
the stock with the same strike price and expiration as the call
option is trading at $2. The current stock price is $60 and a $1
dividend is expected in three months. Zero coupon risk-free bonds
with face value of $100 and maturing after 3 months and 6 months
are trading at $99...

A European call option on a stock with a strike price of $75 and
expiring in six months is trading at $5. A European put option on
the stock with the same strike price and expiration as the call
option is trading at $15. The current stock price is $64 and a $2
dividend is expected in three months. Zero coupon riskāfree bonds
with face value of $100 and maturing after 3 months and 6 months
are trading at $99...

A
European call option and put option on a stock both have a strike
price of $20 and an expiration date in three months. Both sell for
$2. The risk-free interest rate is 5% per annum, the current stock
price is $25, and a $1 dividend is expected in one month. Identify
the arbitrage opportunity open to a trader.

A European call option and put option on a stock both have a
strike price of $25 and an expiration date in four months. Both
sell for $4. The risk-free interest rate is 6% per annum, the
current stock price is $23, and a $1 dividend is expected in one
month. Identify the arbitrage opportunity open to a trader.

A
European call option and put option on a stock both have a strike
price of $20 and an expiration date in three months. Both sell for
$3. The risk-free interest rate is 10 % per aunum, the current
stock price is $19 , and a $1 dividend is expected in one month.
identify the arbitrage oppotunity to a trader.

The strike price for a European call and put option is $56 and
the expiration date for the call and the put is in 9 months. Assume
the call sells for $6, while the put sells for $7. The price of the
stock underlying the call and the put is $55 and the risk free rate
is 3% per annum based on continuous compounding. Identify any
arbitrage opportunity and explain what the trader should do to
capitalize on that opportunity....

1. A European call option and put option on a stock both have a
strike price of $20 and an expiration date in three months. Both
sell for $3. The risk-free interest rate is 10% per annum, the
current stock price is $19, and a $1 dividend is expected in one
month. Is there an arbitrage opportunity? If there is an arbitrage
opportunity, clearly state what condition must be satisfied to
eliminate the arbitrage opportunity. What is the strategy
followed...

"TSLA stock price is currently at $800. The $1000-strike
European TSLA call option expiring on December 18, 2020 has a delta
of 0.45. N(d2) of the option is 0.25. Assume zero interest rate and
no dividend. Compute the Black-Merton-Scholes value of the TSLA
European put option at the same strike and expiry."

"TSLA stock price is currently at $800. The $1000-strike
European TSLA call option expiring on December 18, 2020 has a delta
of 0.45. N(d2) of the option is 0.25. Assume zero interest rate and
no dividend. Compute the Black-Merton-Scholes value of the TSLA
European put option at the same strike and expiry."

"TSLA stock price is currently at $800. The $1000-strike
European TSLA call option expiring on December 18, 2020 has a delta
of 0.45. N(d2) of the option is 0.25. Assume zero interest rate and
no dividend. Compute the Black-Merton-Scholes value of the TSLA
European put option at the same strike and expiry."

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