Put-call parity1 does put-call parity mean the put and the, Ask an Expert

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Put-call parity

1. Does put-call parity mean the put and the call option (of the same stock, with same expiration, with same strike price) have the same value/price?

If not, for put and call to have the same prices, what must be the relationship between the strike price and the current stock price?

Hint: Find the Apple option page from Yahoo Finance and look for the strike price where the call and put price are similar.

2. A European call option and a European put option on a stock both have the same strike price of $45 and expire in 6 months. Currently, the market call price is $10 and the put price is $6. The risk-free rate is 2% per annum, and the current stock price is $49. Identify the arbitrage opportunity open to the trader. All the interest rates are with continuous compounding.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91600845

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