for $25 put, and $5.5 for $30 put. Use graphs to illustrate the profit pattern of this spread. What are the maximum gains and maximum losses from the spread?

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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A stock price is currently $23. A reverse (i.e. short) butterfly
spread is created from put options with strike prices of $20,
$25, and $30. The costs of the puts are $1 for $20 put, $3
for $25 put, and $5.5 for $30 put. Use graphs to illustrate
the profit pattern of this spread. What are the maximum
gains and maximum losses from the spread?
Transcribed Image Text:A stock price is currently $23. A reverse (i.e. short) butterfly spread is created from put options with strike prices of $20, $25, and $30. The costs of the puts are $1 for $20 put, $3 for $25 put, and $5.5 for $30 put. Use graphs to illustrate the profit pattern of this spread. What are the maximum gains and maximum losses from the spread?
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