Exploring Mispricing and Arbitrage Strategies in the U.S. Stock Market: A Comprehensive Analysis Using CBOE Options Data
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Abstract
This research examines the suitability of options pricing in comparison to the prices of their underlying stocks. The analysis employs real-world options data from the Chicago Board Options Exchange (CBOE) market, covering the period from mid-January 2017 to the end of the month. The accuracy of options prices is assessed using multiple criteria: upper and lower bounds, strict lower bounds, exercise price, time to maturity, convexity conditions, put-call parity conditions, and the Black-Scholes model. These criteria aid in identifying optimal trading positions and evaluating various profit factors. The findings indicate significant arbitrage opportunities when the put-call parity condition is violated. Additionally, the study investigates the factors that contribute to these pricing discrepancies.
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