1. Using calls on AAPL, you can construct a short butterfly on June 1, 2018 by buying two AAPL180608C00190000 calls at $1.90 premium and simultaneously selling one AAPL180608C00185000 call at $5.65 premium and another AAPL180608C00195000 call at $0.33 premium. This short butterfly gives the trader a net credit to enter the position and will expire in 5 trading days on June 8, 2018. Discuss the payoffs of this short butterfly at its expiration and the range of profit/loss. (Hint: If on June 8, 2018, AAPL closes at $181, $182, $183, ...,$189, $190, $191, ..., $197, $198, $199, respectively, what will be the profit/loss of this short-butterfly position for each AAPL price?)

2. The opposite of the short butterfly is the long butterfly which will short two at-the-money or near-the-money calls (or puts) and buy one call (or put) with a higher strike and another call (or put) with a lower strike. Some options traders claim that long butterflies constructed near the expiration date (e.g., within one to two weeks of expiration) are income generators. Do you agree? Why? (Use the data you have calculated for the above case of short butterfly to substantiate your argument).