The lower limit arbitrage of call options refers to (the following analysis is for European options):

At any time, the price of a European call option that does not pay dividends should be higher than the current price S of the underlying asset and the exercise price The difference between the discounted value Ke^-rT and zero is larger. That is, the price of a European call option that does not pay dividends should satisfy the following relationship: C>max(S-Ke^-rT,0)

? Among them, C represents the call option premium; K is the option execution price ; T is the expiration time of the option; S is the current price of the underlying asset and r is the risk-free interest rate (continuous compound interest) of the investment that matures at time T.

When S-Ke^-rT>0 and C

From another perspective, the meaning of option lower limit arbitrage means that the option price should be greater than the greater of its intrinsic value and zero. The value of an option consists of intrinsic value and time value. Among them, the intrinsic value of the option refers to the profit that the buyer can obtain if he exercises the option immediately.

? Specific to your question, the lower limit of the call option is max(S-Ke^-rT,0). After calculation, S-Ke^-rT is 30-28^-0.08*6/12=3.0979. The lower limit of the call option is max(3.0979,0)=?3.0979

? If it is bullish at this time If the option price is lower than 3.0979, the lower limit arbitrage conditions for a single call option are met, that is, S-Ke^-rT>0, and C

? The profit and loss curve of the call option lower limit arbitrage is similar to the profit and loss curve of the put option being completely shifted above the 0 axis. The profit and loss diagram is as follows (note that it is only a diagram. This question requires modifying the numbers, so I will not redraw it)

The operation method is to buy call options and short the underlying asset (stock) at the same time. In short, it’s “buy low, sell high.” In actual operation, we can also use futures of the underlying asset to replace the spot of the underlying asset to achieve more convenient operations and lower transaction costs. In particular, it is very inconvenient to short stocks in some countries, such as China (our country needs to borrow securities to short, which is expensive and the process is cumbersome).

In addition, option arbitrage is divided into three major categories: first, single option arbitrage, including single option upper limit arbitrage, single option lower limit arbitrage; second, option at-the-money arbitrage, including buy-and-sell right at-the-money arbitrage, buy-and-sell right arbitrage parity arbitrage with futures; the third is multiple option spread arbitrage, also known as price relationship arbitrage between options, including vertical spread upper limit arbitrage, vertical spread lower limit arbitrage, convex spread arbitrage, and box arbitrage.