Question: A trader creates a long butterfly spread from put options with strike prices of $90, $100, and $110 per share by trading a total of

  1. A trader creates a long butterfly spread from put options with strike prices of $90, $100, and $110 per share by trading a total of 40 option contracts (buy 10 contracts struck at $90, sell 20 contracts struck at $100 and buy 10 contracts struck at $110). Each contract is written on 100 shares of stock. The options are worth $18, $24, and $32 per share of stock.
    1. What is the value of the butterfly spread at maturity as a function of the then stock price?
    2. What is the profit of the butterfly spread at maturity as a function of the then stock price?

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