Option Arbitrage and Quantification Realization Based on Time Value

Abstract

Option is a very important financial derivative instrument, with hedging, speculation, price discovery and other functions. Based on the option parity formula, this paper finds out that the time value of the option has arbitrage opportunity by studying the spot price of the 50ETF and 50ETF fund. According to the relationship between the time value of the option and the trend of the subject matter, some arbitrage strategies are developed. The result of the last back test shows that these strategies have a good return.