28. Look at the following information. (Consider both call and put spreads). (15 pts) Security Qty Bid
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28. Look at the following information. (Consider both call and put spreads). (15 pts)
Security | Qty | Bid | Ask |
Invesco QQQ Trust ETF | $399.61 | $399.63 | |
QQQ 14 JAN 2022 405 CALL | X | $0.44 | $0.45 |
QQQ 14 JAN 2022 410 CALL | X | $0.07 | $0.10 |
QQQ 14 JAN 2022 415 CALL | X | $0.01 | $0.04 |
QQQ 14 JAN 2022 390 PUT | X | $0.35 | $0.36 |
QQQ 14 JAN 2022 385 PUT | X | $0.17 | $0.19 |
QQQ 14 JAN 2022 380 PUT | X | $0.10 | $0.12 |
a. If you decide to enter into 10 long butterfly spread, how would it be structured, and what would the potential profit or loss be?
b. What is the spread's profit-to-loss ratio?
c. How much margin (buying power) does this position require?
d. What are the breakeven points?
e. If there is a 90% chance that the stock's value will fall outside the breakeven points for the spread, what is the expected return?
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