Because of arbitrage, an option should not sell for less than its intrinsic value.

Name: Because of arbitrage, an option should not sell for less than its intrinsic value.
Brand: Quizplus
Rating: 4.9 (27 reviews)

Question

Quizplus · Accepted Answer

Arbitrage opportunities arise when an option is selling for less than its intrinsic value, allowing traders to buy the option and immediately exercise it for a risk-free profit, thus options should not sell for less than their intrinsic value in efficient markets.

Because of Arbitrage, an Option Should Not Sell for Less