Question 17

Considering the box spread created in the previous question, the initial cost of the spread is?

• the sum of the net debit balances associated with the underlying spreads
• the sum of the net credit balances associated with the underlying spreads
• the difference in the exercise prices (E₂ E₁)
• none of the above is correct

Question 18

Suppose an investor adds a call to the long straddle, thus creating a strap. What will this do to the breakeven stock price?

• lower both the upside and downside breakeven values
• raise the upside and lower the downside breakeven values
• lower the upside and raise the downside breakeven values
• raise both the upside and downside breakeven values
• none of the above

Question 19

Which of the following strategies can realize profits in a rising market?

• put bull spread
• long straddle
• long butterfly spread
• call bull spread
• all of the above