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A trader wishes to construct a butterfly spread in the calls

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A trader wishes to construct a butterfly spread in the calls

A trader wishes to construct a butterfly spread in the calls listed below centered about a strike
price of 40, with 90 days to go to expiration. Using the 38, 40 and 42 strikes shown below,
describe how such a position could be set up.. Calculate the dollar profit on 10 such butterfly
spreads assuming that the stock closes at the most profitable price for this strategy.

Current Stock Price 41.5 Volatility 27% 90 days to expiration

90 day calls strike 38 5.28
90 day calls strike 40 3.16
90 day calls strike 42 2.02

 

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