"A call option on Apple corp. shares with an exercise price of $122 per share, expiry in two months, is currently trading at $6. The put option with the same exercise price and date is also trading at $6."
a. Your friend is very excited. He found an easy way to get rich: “Long a put and a call with the same strike price and one of them will always be in the money!!!!” You can use your pay-off diagram(s) to explain the error in his plan.
b. Beyond which share prices does your friend’s strategy become profitable? (Remember: He paid for BOTH options)