Describe the arbitrage opportunity open to trader

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Options and arbitrages.

A European call option and a put option on a stock both have a strike price of $30 and an expiration date of three months. The call price is $2, the put price is $1. The risk-free interest rate is 10% per annum with continuous compounding, the current stock price is $31, and no dividend is paid. Using put-call parity, identify - and describe - the arbitrage opportunity open to a trader.

Reference no: EM131992126

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