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:

Market Efficiency

Refers to the extent to which stock prices and other securities prices reflect all available, relevant information.

Market Integrity

The condition of a financial market being free from manipulation or fraudulent trading practices, ensuring fair and efficient operation.

Federal and Provincial Jurisdiction

The division of powers and responsibilities between the federal government and the provinces.

Securities Regulation

A set of laws and regulations that govern the sale, purchase, and creation of financial securities to protect investors.