Question
A stock price is currently $23. A reverse butterfly spread (i.e. shorting the butterfly spread) is created from options with strike prices of $20, $25,
A stock price is currently $23. A reverse butterfly spread (i.e. shorting the butterfly spread) is created from options with strike prices of $20, $25, and $30. Which of the following is true?
The gain when the stock price is greater than $30 is less than the gain when the stock price is less than $20. | ||
The gain when the stock price is greater than $30 is the same as the gain when the stock price is less than $20. | ||
It is incorrect to assume that there is always a gain when the stock price is greater than $30 or less than $20. | ||
The gain when the stock price is greater than $30 is greater than the gain when the stock price is less than $20. |
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