You are an options trader for a hedge fund. Your assistant prepared the following sheet containing...

 

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You are an options trader for a hedge fund. Your assistant prepared the following sheet containing the prices of various options. Expiration Months March June September Stock Stock Option Price Exercise Price PIE 100 Put 90 2.90 3.50 6.00 PIE 100 Put 100 3.00 4.00 3.50 PIE 100 Put 110 13.00 13.80 14.50 PIE 100 Call 90 9.80 15.40 (1) Appraise the options and identify three (3) arbitrage opportunities. Show how you would profit from them. Assess whether the strategy you propose to profit from the arbitrage opportunities is economically feasible. Use the following format to answer this question. Arbitrage opportunity: Strategy: Economically Feasible: Yes/No; Reason (25 marks) You are an options trader for a hedge fund. Your assistant prepared the following sheet containing the prices of various options. Expiration Months March June September Stock Stock Option Price Exercise Price PIE 100 Put 90 2.90 3.50 6.00 PIE 100 Put 100 3.00 4.00 3.50 PIE 100 Put 110 13.00 13.80 14.50 PIE 100 Call 90 9.80 15.40 (1) Appraise the options and identify three (3) arbitrage opportunities. Show how you would profit from them. Assess whether the strategy you propose to profit from the arbitrage opportunities is economically feasible. Use the following format to answer this question. Arbitrage opportunity: Strategy: Economically Feasible: Yes/No; Reason (25 marks)

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