Question
Three European call options with the same expiry date on the same stock, have strike prices of $22, $23, and $24, respectively. The prices of
Three European call options with the same expiry date on the same stock, have strike prices of $22, $23, and $24, respectively. The prices of the call options are $2.60, $2.10, and $1.90, respectively. One call option gives the holder the right to buy one share. You expect stock price to be stable around the current stock price of $23. Construct a butterfly strategy using the call options quoted to capitalize on your expectation. Present your strategy with a profit diagram and a payoff table. Identify two breakeven stock prices, the minimum and maximum profits of the strategy at the expiration of the options
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