Question
You decide to design a bullish spread with two American call options: buy the call struck at X 1 = 500 trading at C 1
You decide to design a bullish spread with two American call options: buy the call struck at X1 = 500 trading at C1 = $50, write the call struck at X2 = 560 trading at C2 = $5. The stock price is currently $530.
If in the next instant the stock price falls to $529, which will be true?
a. | C1 will increase faster than C2 and the value of your spread position will fall | |
b. | C1 will increase faster than C2 and the value of your spread position will rise | |
c. | C1 will decline faster than C2 and the value of your spread position will rise | |
d. | C1 will decline faster than C2 and the value of your spread position will fall |
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