Use the options prices for Spotify to create a butterfly spread using call optio
ID: 2820826 • Letter: U
Question
Use the options prices for Spotify to create a butterfly spread using call options with 160 and 165 and 170 strike prices. Be sure to use the appropriate bid and ask prices.
What will be your cash flow per share when you set up the position? Show all cash flows: inflows, outflows, and net flow.
Inflow ___________ Outflow___________
Net Flow___________
The maximum profit on the butterfly spread is ___________
The minimum profit on the butterfly spread is ___________
The breakeven points on the butterfly spread are ___________ and ___________
What will be your profit per share on the net position if at expiration the price of the stock is $168.54?
replace the 160 strike price call with a 155 strike price call.
What is the net cash flow to set up the position? ____________
What is the maximum profit? ____________
What is the minimum profit? ____________
What is the breakeven point? ____________
SPOT180928C00160000 2018-09-20 10:10AM EDT Strike 160.00 Bid 14.90 Ask16.20Explanation / Answer
In butterfly spread , write two call of strike price 165 , and buy call option with strike price 160 and 170.
Inflow (Ask price recieved for 165 call) = 2* 11.10 = 22.20
Out flow ( Bid Price paid 160 and 170 calls) = (14.90 + 6.10) = (21.00)
Net flow = 1.20.
Max Profit = Strike Price of sold Call - Strike Price of Lower Strike Long Call - Net Premium & Commissions Paid.
Max profit = 165 -160 -1.20 = 3.80
The minimum profit = Net Premium Paid = 1.20.
The breakeven points :
Answer) Net pay off = (168.54 -160) + 2(165 - 168.54) + 1.20 =2.66
Answer) if 160 will replace with 155 strike
Inflow (Ask price recieved for 165 call) = 2* 11.10 = 22.20
Out flow ( Bid Price paid 155 and 170 calls) = (19.0 + 6.10) = (25.10)
Net flow = (2.90)
Max Profit = Strike Price of sold Call - Strike Price of Lower Strike Long Call - Net Premium & Commissions Paid.
Max profit = 165 -150 +2.90 = 7.90
The minimum profit = Net Premium Paid = (2.90)
The breakeven points :
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