Reference no: EM131603480
Consider the following strategy:
sale of one call with the exercise price X1 = $75 for $6,
sale of one call with the exercise price X2 = $80 for $4,
buy of one call with the exercise price X3 = $70 for $9,
and buy of one call with the exercise price X4 = $85 for $2.
a. Graph the profit diagram to this strategy.
b. What is the maximum profit of a trader?
c. What is the maximum loss?
d. What is the name of this strategy?
e. What is a trader betting on when he/she is employing such a strategy?
NOTE Requires step-by-step solution with clearly defined formula.