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If I buy 100 shares of XYZ at 18$ and a put option with one month to go at a strike of 19$ for 45 cents, then my total expense is 1845$ .

Now do I have a guaranteed profit of 1900 - 1845 = 55 $ in a month? This seems to good to be true! (Ignore commission for this example)

Are there any catches here?

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    old quote, more like guaranteed loss – CQM May 8 '14 at 0:18
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Your price for the put is unrealistic. If the stock is at $18, and the put has a strike of $19, then the put is worth at least $1, since otherwise one could buy the put and the underlying stock, and immediately exercise the put (assuming it is American, as is usual for stocks), to get a guaranteed profit. This is called "arbitrage". Any such opportunities are quickly taken advantage of, bringing the price of the put up.

In practice the value of an option is at least its intrinsic value, plus a "time value" component.

As JoeTaxpayer suggested, it may be that you were looking at an old quote. The price the option was last traded at may be quite different from the current bid/asks, because many options are not traded often, and the last trade can easily have been a few days ago.

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    My gut says he's looking at a stale quote, when he bids .45, he'll see a $1.10 ask. – JTP - Apologise to Monica May 7 '14 at 20:28
  • @JoeTaxpayer Good point, I'll add that to my answer. – Pieter Naaijkens May 7 '14 at 20:30

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