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Question 2 Assume a stock is currently trading at $150. One call option has a strike price of $145 and costs $10, and another call

Question 2

Assume a stock is currently trading at $150. One call option has a strike price of $145 and costs $10, and another call option has a strike price of $155 and costs $5.

Show the gross and net pay-off table of a Bull spread on call option, and show the graph of the net payoff diagram.

Hint: Consider the three possible stock positions: S K1,K1 < S < K2, S K2.

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