A call trading below its own intrinsic value
Asked at IMC
An American call on a stock trading at \80$60$18$.
Is there an arbitrage? Construct it, and state the lower bound a call price must satisfy.
Show a hint
What could you do the instant you own the call? Compare that guaranteed value to what you paid.
Your answer
This one is open-ended. Work it through, then check your reasoning against the full solution.