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Red Hat stock sells for 93. Three-month call options on Red Hat at 88 sell for...

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Finance

Red Hat stock sells for 93. Three-month call options on Red Hatat 88 sell for 6.616. Three-month put options at 88 sell for 4.177.You can go long or short 175 units of any or all of these threeassets. The interest rate is 2% per year.

A: Explain your arbitrage strategy. How much money will youmake?

B: Now assume the price of Red Hat stock is 88. Explain yourarbitrage strategy. How much money will you make?

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