Question
Call options are available with strike prices of $15, $17 ½ and $20 at prices of...
Call options are available with strike prices of $15, $17 ½ and $20 at prices of $4, $2, and $0.5. Consider a butterfly spread.
A. What are the breakeven stock prices for this trade?
B. What are the stock prices that make this a profitable trade?
Homework Answers
Answer #1
I have answered the question below
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Answer:
Breakeven price occurs at ST = 15.5 when profit = 0
Becasue, from the table, ST - 15 - 0.5 = 0
=> ST = 15.5
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