Question: Three call options on a stock have the same expiration date and strike prices of $55, $60, and $65. The market prices are $8, $5,

Three call options on a stock have the same expiration date and strike prices of $55, $60, and $65. The market prices are $8, $5, and $3, respectively.

a) Explain how a butterfly spread can be created.

b) Construct a table showing the profit from the strategy.

c) What is the range of stock prices where the butterfly spread would lead to a loss?

d) Plot a graph of the final profits (after excluding cost) from the strategy for a closing stock price range of $0 to $100 in increments of $5 (on the X-axis).

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