4 Question 4 A butterfly spread consists of three options on the same stock. All three options have the same expiration time T . The options have strike prices K1, K2 and K3, which are are equally spaced . Hence K2 is located at the midpoint of K1 and K3, so K2 = (Kit K3)/2. A butterfly spread can be created using three call options or three put options. The spread consists of long one option at Ki, short two options at K2, long one option at Ks