Solved: Buy-sell the option in order to take advantage of mispricing, Finance Basics

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Buy-sell the option in order to take advantage of mispricing

Problem:

Mr. Nash holds an American put option on Delta Triangle, a non-dividend-paying stock. The strike price of the put is $40, and Delta Triangle's stock is currently selling for $35 per share. The current market price of the put is $4.50. Is this option correctly priced? If not, should Mr. Nash buy or sell the option in order to take advantage of the mispricing?

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Finance Basics: Buy-sell the option in order to take advantage of mispricing

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