Consider a Condor Made Up of Calls at Strikes 90

question 20

Multiple Choice

Consider a condor made up of calls at strikes 90, 95, 100, 105, and a butterfly call spread at strikes 90, 97.5, 105. Which of the following statements is valid?

• A) A condor is worth less than the butterfly spread irrespective of the level of the stock price.
• B) A condor is worth more than the butterfly spread irrespective of the level of the stock price.
• C) A condor is worth less than the butterfly spread when the stock price is less than 90.
• D) A condor is worth more than the butterfly spread when the stock price is greater than 105.

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Definitions:

Reinforcement

This psychological principle involves the use of consequences to strengthen an organism's future behavior whenever that behavior is preceded by a specific antecedent stimulus.

Learning Theory

An educational framework that explains how individuals acquire knowledge, skills, and behaviors through experience.

Classical Conditioning

A learning process that occurs through associations between an environmental stimulus and a naturally occurring stimulus.

Language Acquisition Device

Hypothesized by Noam Chomsky, it's an innate mechanism or faculty that allows humans to acquire language.