A Trader Creates a Long Butterfly Spread from Options with Strike

question 6

Multiple Choice

A trader creates a long butterfly spread from options with strike prices $60,$65,and $70 by trading a total of 400 options.The options are worth $11,$14,and $18.What is the maximum net loss (after the cost of the options is taken into account) ?

• A) $100
• B) $200
• C) $300
• D) $400

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Definitions:

Professional Corporation

A type of corporate structure available to professionals like lawyers, doctors, and accountants, which offers certain legal and financial protections.

Sole Proprietorship

A type of business where a single individual owns, manages, and is responsible for all aspects of the business, including liabilities.

Non-Profit Organization

An organization dedicated to furthering a particular social cause or advocating for a shared point of interest, without aiming for profit.

Managing Partner

The partner in a law firm who makes decisions relating to the firm’s policies and procedures and who generally oversees the business operations of the firm.