Question: Suppose a trader does not expect the security prices for an asset to be very volatile in the future. She would like to create an

Suppose a trader does not expect the security prices for an asset to be very volatile in the future. She would like to create an option strategy that will allow her to earn a certain amount of profit with limited risk. According to her option screen the following strike prices are available: a. Explain in detail how the trader can form a long butterfly spread position. (3 marks)

b. Fully draw and label the payoff diagram for this strategy (4 marks)

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