Assume that the future dividends on a given stock S are known, and denote their discounted value at the present time t by D¯(t). For American call and put options values C(t) ,P(t), suppose we have that

Question

P(t)−D¯(t)−K>C(t)−S(t)

Suppose you buy the call option and deposit D¯(t)+K at the risk-free rate.

Doing which of the following can you make arbitrage profit?:

a. Sell the put option and sell short one share of the stock.
b. Sell the put option and buy one share of the stock.
c. Buy the put option and sell short one share of the stock.
d. Buy the put option and buy one share of the stock.