The 90-, 100-, and 110-Strike Calls Are Trading at $12 $- \$ 5$

question 10

Multiple Choice

The 90-, 100-, and 110-strike calls are trading at $12, $5, $3, respectively. The stock price is at $100. What is the maximum net payoff on a short butterfly spread using these options?

• A) \(- \$ 5\)
• B) \(\$ 0\)
• C) \(\$ 5\)
• D) \(\$ 10\)

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Definitions:

Transaction Costs

Expenses incurred when buying or selling a good or service, which may include broker fees, commissions, and other charges.

PE Ratio

The price-to-earnings ratio, a valuation metric that compares a company's stock price to its earnings per share.

Stock Repurchase

A company's buying back of its own shares from the marketplace, which can reduce the number of outstanding shares and potentially increase the stock value.

Stock Dividend

A payment made by a corporation to its shareholders in the form of additional shares, rather than cash.