Below is a graph that shows the Pay-Offs associated with the Iron Condor strategy.

This graph was from theoptionsguide.com

Suppose XYZ stock is trading at $45 in June. An options trader executes an iron condor by

buying a JUL 35 put for $50, writing a JUL 40 put for $100, writing another JUL 50

call for $100 and buying another JUL 55 call for $50.

Question:

a. Please show why $100 is the maximum possible profit in this particular iron condor

trading strategy. Assume that XYZ stock goes to $48.

b. Please show why $400 is the maximum possible loss. Assume that XYZ stock goes to $20, and

then assume the opposite, that it goes to $80. Mathematically show that the maximum loss is $400 in both

cases.

c. Does the investor who employs the Iron Condor benefit in a relatively neutral market, or in a relatively volatile market?

Please use your answers in parts a and b to justify.