PR_CH01_Q014. Call options strikes 100, 120, 130 — bid-ask?
difficulty ·answer type: strategy·✓Not solved
Problem
Call options with strikes 100, 120, and 130 on the same underlying asset and with the same maturity are trading for 8, 5, and 3, respectively (there is no bid-ask spread). Is there an arbitrage opportunity present? If yes, how can you make a riskless profit?
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