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