Which of the following enables an arbitrage profit to be made (excluding transaction costs) from a call option if the market price of the underlying share is $5 50,the price of the call is $1 50,and the exercise price is $3 80?
A) Buy the call option,exercise it and sell the underlying share.
B) Buy a put option,exercise it and buy the underlying share.
C) Buy a call option and hold onto it until expiry.
D) Sell a put option now and realise the profit.
Correct Answer:
Verified
Q1: For a put option (bought)with an exercise
Q3: A call option gives a buyer:
A)an asset
Q4: Which option gives the right to buy
Q5: The value of an option,if exercised immediately,is
Q6: At expiry,a call option is worth:
A)the maximum
Q7: If the share price at the expiry
Q8: The exercise price of an option is:
A)the
Q9: Ratio of the change in an option
Q10: What is the payoff of a call
Q11: A right to discontinue an investment project
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