Trader betting on when he is employing such strategy

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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.

Reference no: EM131603480

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