What is the spread profit-to-loss ratio

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Reference no: EM133111806

Look at the following information. (Consider both call and put spreads).

Security

Qty

Bid

Ask

Invesco QQQ Trust ETF

 

$399.61

$399.63

QQQ 14 JAN 2022 405 CALL

X

$0.44

$0.45

QQQ 14 JAN 2022 410 CALL

X

$0.07

$0.10

QQQ 14 JAN 2022 415 CALL

X

$0.01

$0.04

QQQ 14 JAN 2022 390 PUT

X

$0.35

$0.36

QQQ 14 JAN 2022 385 PUT

X

$0.17

$0.19

QQQ 14 JAN 2022 380 PUT

X

$0.10

$0.12

a. If you decide to enter into 10 long butterfly spread, how would it be structured, and what would the potential profit or loss be?

b. What is the spread's profit-to-loss ratio?

c. How much margin (buying power) does this position require?

d. What are the breakeven points?

e. If there is a 90% chance that the stock's value will fall outside the breakeven points for the spread, what is the expected return? 

Consider the information in the previous problem.

  1. If you decide to enter into 10 short butterfly spread, how would it be structured, and what would the potential profit or loss be?
  2. What is the spread's profit-to-loss ratio?
  3. What are the breakeven points?
  4. How much margin (buying power) does this position require?

Reference no: EM133111806

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