Two call options are written on the same stock that trades for $70, and both calls have an exercise price of $85. Call 1 expires in six months, and Call 2 expires in three months. Assume that Call 1 trades for $6 and that Call 2 trades for $7. Do these p

  Two call options are written on the same stock that trades for $70, and both calls have an exercise price of $85. Call 1 expires in six months, and Call 2 expires in three months. Assume that Call 1 trades for $6 and that Call 2 trades for $7. Do these prices allow arbitrage? Explain. If they do permit arbitrage, explain the arbitrage transactions. 

 

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