A Stock Price Is Currently $23

question 15

Multiple Choice

A stock price is currently $23.A reverse (i.e short) butterfly spread is created from options with strike prices of $20,$25,and $30.Which of the following is true?

• A)The gain when the stock price is greater that $30 is less than the gain when the stock price is less than $20
• B)The gain when the stock price is greater that $30 is greater than the gain when the stock price is less than $20
• C)The gain when the stock price is greater that $30 is the same as the gain when the stock price is less than $20
• D)It is incorrect to assume that there is always a gain when the stock price is greater than $30 or less than $20

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Definitions:

Bumper Crops

Exceptionally large harvests of crops, usually resulting from favorable growing conditions.

Gross Incomes

The total income received before any deductions or taxes are subtracted.

Price Elasticity

An indicator of the degree to which the demand for a product is affected by fluctuations in its price, showing how sensitive buyers are to variations in cost.

Monet Paintings

Works of art created by Claude Monet, a founder of French Impressionist painting, characterized by their impression of the landscape or scenes, focusing on the effects of light and color.