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An investor creates a butterfly spread by trading 9-month call...

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# An investor creates a butterfly spread by trading 9-month call...

An investor creates a butterfly spread by trading 9-month call options with strike prices of \$50, \$60, and \$70. The prices of the options are \$12.25, \$7.00, and \$3.00, respectively. (Note: Total payoff does not include the initial investment.)

a. What is the initial investment?

b. What is the total payoff when the stock price in 9 months is \$45?

c. What is the total payoff when the stock price in 9 months is \$65?

d. What is the total payoff when the stock price in 9 months is \$75?

e. What is the profit/loss (P&L) when the stock price in 9 months is \$56?

f. What is the profit/loss (P&L) when the stock price in 9 months is \$68?

g. What is the profit/loss (P&L) when the stock price in 9 months is \$78?

## Answer & Explanation

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Answered by mafatay07 on coursehero.com

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## Step-by-step explanation

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