Suppose you want to create a Butterfly Spread option strategy based on CAT call options The butterfly spread will involve the following Buying a call option with strike price $170 Selling two call options with strike price $190 Buying a call option with strike price $210 You want all of these options to have the same maturity of January 21, 2022 Go to Yahoo Finance and search for Caterpillar (symbol CAT), then click on the Options tab, then select January 21, 2022 from the dropdown box below the stock price to obtain a list of CAT options with approximately twelve months to expiration The Ask price is the price at which you can buy an option while the Bid price is the price at which you can sell an option Report the bid and ask prices for each of the three call options described above Also report the date, time, and stock price when you retrieved these options prices You should collect these data during regular trading hours (10 30am to 5 00pm CST on weekdays), as bid and ask prices are sometimes not available during off market hours Provide the payoff function for each range of strike prices in which the stock price in could land at expiration There are five ranges in which the stock price could land at expiration 170 170 190 190 210 210 Graph the payoff of the option strategy as a function of What is the net cost of this butterfly spread Remember to use the bid price when you sell a call option, and the ask price when you buy a call option You receive money when you sell an option and pay money when you buy an option What kind of price movement are we betting on with this strategy (No calculations needed for this question ) Disregard the previous questions about the butterfly spread Suppose that you buy a CAT call option with a strike price of $90 and an expiration date of January 21, 2022 Because the strike price is less than the current stock price, this option is considered in the money Report the ask price of this call option and the current stock price of CAT Suppose you immediately exercise this call option What is your payoff Why do you think the payoff is less than the price at which you bought this option

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Suppose you want to create a Butterfly Spread option strategy based on CAT call options. The butterfly spread will involve the following: Buying a call

Suppose you want to create a Butterfly Spread option strategy based on CAT call options. The butterfly spread will involve the following:

Buying a call option with strike price $170
Selling two call options with strike price $190
Buying a call option with strike price $210

You want all of these options to have the same maturity of January 21, 2022.

Go to Yahoo! Finance and search for Caterpillar (symbol: CAT), then click on the Options tab, then select January 21, 2022 from the dropdown box below the stock price to obtain a list of CAT options with approximately twelve months to expiration. The Ask price is the price at which you can buy an option while the Bid price is the price at which you can sell an option.

Report the bid and ask prices for each of the three call options described above. Also report the date, time, and stock price when you retrieved these options prices. You should collect these data during regular trading hours (10:30am to 5:00pm CST on weekdays), as bid and ask prices are sometimes not available during off-market hours.

Provide the payoff function for each range of strike prices in which the stock price in could land at expiration. There are five ranges in which the stock price could land at expiration:

< 170
170 < < 190
190 < < 210
> 210

Graph the payoff of the option strategy as a function of .

What is the net cost of this butterfly spread? Remember to use the bid price when you sell a call option, and the ask price when you buy a call option. You receive money when you sell an option and pay money when you buy an option.

What kind of price movement are we betting on with this strategy? (No calculations needed for this question.)

Disregard the previous questions about the butterfly spread. Suppose that you buy a CAT call option with a strike price of $90 and an expiration date of January 21, 2022. Because the strike price is less than the current stock price, this option is considered in-the-money.

Report the ask price of this call option and the current stock price of CAT.
Suppose you immediately exercise this call option. What is your payoff? Why do you think the payoff is less than the price at which you bought this option?