Maximum loss for the long butterfly spread is limited to the initial debit paid to execute the trade?

1. True
2. False

True, you cannot lose more than the butterfly costs. 

The maximum profit from a long butterfly occurs if the options expire when the stock price is the same as the short options’ strike price, at the option body?

1. True
2. False

True, we want the stock to finish right at the short strikes for the butterfly to gain its highest value.

 

If we pay $2.00 debit for the 90/100/110 long call butterfly spread, our breakevens are?

1. $98 & $102
2. $92 & $108
3. $97 & $103

Put side= $90.00 lower strike price + $2.00 debit = $92.00
Call side = $110.00 higher strike price - $2.00 debit = $108.00

All 3 questions completed!


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