Question
A trader creates a long butterfly spread from options with strike prices $60, $65, and $70 by trading a total of four 100-share options. The
A trader creates a long butterfly spread from options with strike prices $60, $65, and $70 by trading a total of four 100-share options. The options are worth $11, $14, and $18, respectively. Which of the following is accurate about this position?
| a. | It involves buying a put with a strike price of $60 and also buying another put with a strike price of $70. | |
| b. | The maximum loss on this position is $200. | |
| c. | The maximum gain on this position by the expiration date is $300. | |
| d. | It involves selling two call options with a strike price of $65. | |
| e. | If at expiration the stock price was $68, the profit would be $200. |
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Intermediate Financial Management
Authors: Eugene F Brigham, Phillip R Daves
9th Edition
032431986X, 9780324319866
