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A trader creates a short butterfly spread from put options with strike prices $30, $35, and $40. The options are worth $1.5, $2, and $3,
A trader creates a short butterfly spread from put options with strike prices $30, $35, and $40. The options are worth $1.5, $2, and $3, respectively. The options are written on the same underlying asset and have the same maturity. Explain in details a. when the trader will make a profit from this strategy and b. when the trader will achieve maximum profit for this strategy. (max 150 words)
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