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Suppose you want to establish a bullish spread strategy. The are two call options. The first...

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Finance

Suppose you want to establish a bullish spreadstrategy. The are two call options. The first one has X1=$50 andC1=$5. The second one has X2=$40 and C2=$6.

When the underlying asset price is S(t)=$45, what is the profitfrom the strategy?

What is the maximum profit of the strategy?

What is the minimum payoff of the strategy?

Answer & Explanation Solved by verified expert
4.1 Ratings (645 Votes)
A bull call spread is constructed by Buying a call option with a lower strike price X2 and selling another call option with a higher strike price X1 Profit Loss from    See Answer
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Suppose you want to establish a bullish spreadstrategy. The are two call options. The first one has X1=$50 andC1=$5. The second one has X2=$40 and C2=$6.When the underlying asset price is S(t)=$45, what is the profitfrom the strategy?What is the maximum profit of the strategy?What is the minimum payoff of the strategy?

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