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:

Recency Bias

is the tendency to weigh recent events more heavily than older ones when making decisions or evaluations.

Individual's Performance

The level of productivity and efficiency demonstrated by an individual in executing their tasks or responsibilities.

Latest Behaviours

The most recent patterns of action or conduct observed within individuals or groups.

Fringe Benefits

Additional benefits, beyond a salary or wage, offered by employers to employees, such as health insurance, retirement plans, and paid time off.