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You buy a call option with a strike price of $40 and sell a call on the same stock with the same expiration date at
You buy a call option with a strike price of $40 and sell a call on the same stock with the same expiration date at a strike price of $50.
a) Is your net premium positive or negative? How do you know?
b) Draw the payoff and profit graphs for this strategy at the expiration date.
c) Is this a bullish or bearish strategy? Briefly explain.
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