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What is arbitrage strategy

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A stock currently sells for $31/share. A 3-month European call option on this stock with a strike price of $30/share has a premium of $3/share. A 3-month European put option on the same stock with a strike price of $30/share has a premium of $2.25/share. Assume a 10% annual continuously compounded risk-free interest rate. Is there any arbitrage opportunities exist? If so, what is your arbitrage strategy? What is your arbitrage profit in three months? Please show all your cash flows from today as well as at the time of the maturity from your arbitrage strategy.

Reference no: EM132685952

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