Question: (a) A trader buys (long) a call option with a strike price of $120 and sells (short) a put option with a strike price of

(a) A trader buys (long) a call option with a strike

(a) A trader buys (long) a call option with a strike price of $120 and sells (short) a put option with a strike price of $100. Both options have the same maturity. The call costs $20 and the price of put is $10. Draw a diagram showing the variation of the trader's profit with the security price at expiry. (b) The (spot) price of oil is currently $80. The forward price for delivery in 1 year is $85. The risk free interest rate is 10%. Is there an arbitrage opportunity? If so, how do you do the arbitrage trading to profit from it

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