Question: A long butterfly spread can be created by buying simultaneously a European call option with a relatively low strike price K1, and another with a
A long butterfly spread can be created by buying simultaneously a European call option with a relatively low strike price K1, and another with a relatively high strike price K3, and writing two European calls with a strike price K2 that is halfway between K1 and K3(all options on the same underlying assets with the same expiration dates). Show that the initial net cash flow stemming from implementing this kind of spread strategy must always be non-positive in efficient option markets.
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