Question: Consider: (a) Stock trades for $100; (b) Calls with exercise prices of $90, $100, and $110 trade at prices of $17.03, $10.38, and $6.50 respectively.

Consider:

(a) Stock trades for $100;

(b) Calls with exercise prices of $90, $100, and $110 trade at prices of $17.03, $10.38, and $6.50 respectively.

If a person buys a $90 call, writes two $100 calls, and buys a $110 call, what is the magnitude of her maximum loss? The answer is 2.77, how do you solve?

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