Option Mispricing & Arbitrage Opportunity

Abstract

This paper explored the option transactions on Chicago Board Options Exchange (CBOE) in January 2017 and investigated mispricing by testing the violation of boundary conditions, put-call-parity, and Black-Scholes model. Scrutinizing all 1,048,575 transactions, the group discovered a considerable amount of mispricing as well as associated arbitrage opportuni-ties. In this paper, the group will present and categorize the discovered mispricing and conceptualize a trend of arbitrage opportunities that will help readers to profit from the mispricing dynamically.