About options on the stock of certain company

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The following information is given about options on the stock of a certain company. S0 = 23 X = 20 rc = 0.09 T = 0.5 σ2= 0.15 No dividends are expected. Suppose you feel that the call is overpriced. What strategy should you use to exploit the apparent mis-valuation? (Due to differences in rounding your calculations may be slightly different. “none of the above” should be selected only if your answer is different by more than 10 shares.) a. buy 791 shares, sell 1,000 calls b. buy 705 shares, sell 1,000 calls c. sell short 791 shares, buy 1,000 calls d. sell short 705 shares, buy 1,000 calls e. none of the above

Reference no: EM131312816

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