Question: A trader wants to form a position by combining two different calls. The calls have the same expiration dates but have different strike prices. The

A trader wants to form a position by combining two different calls. The calls have the same expiration dates but have different strike prices. The trader sells one call with strike of £50 at a price of £1.53, and buys two calls with strike of £52.50 at £0.60 each.

Demonstrate how to graph the profits from this spread strategy.

Argue why the trader would want to adopt this strategy.

Show what are his maximum loss and maximum profits.

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