Three different call options on the same stock with the same expiration date have the following strike prices and option prices:

Strike Price Call Price

$130 $21.15

$140 $15.90

$150 $11.70

A) Draw the payoff and profit diagram for an option strategy where you:

• Buy 1 call with a strike price of $130.00 for $21.15, and
• Buy 1 call with a strike price of $150.00 for $11.70, and
• Sell 2 calls with strike prices of $140.00 for $15.90 each.

B) Calculate the payoffs and profits assuming the spot price is $145 at expiry.

C) In what circumstances might it make sense to invest in this package? (known as a "butterfly spread")