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.

d) 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.

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

f) 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?