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b) A bull spread strategy is created by buying a European call option on a stock with a certain strike price and selling a European
b) A bull spread strategy is created by buying a European call option on a stock with a certain strike price and selling a European call option on the same stock with a higher strike price. Both options have the same expiration date. Suppose that an investor buys for 3 a 3-month European call with a strike price of 30 and sells for 1 a 3-month European call with a strike price of 35.
i. What is the total payoff of this bull spread strategy if the strike price in 3 months is 39?
ii. What is the net profit to this strategy?
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