Question: You create a butterfly spread using calls by buying a call at K1, buying a call at K3, and selling two calls at K2. All
You create a butterfly spread using calls by buying a call at K1, buying a call at K3, and selling two calls at K2. All of the calls are on the same stock and have the same expiration date. Additionally, butterfly spreads assume that K2 = ½(K1 + K3). Calls on a stock with strike prices of $35, $40, and $45 are available for $7.00, $3.59, and $1.31, respectively. Draw a graph showing the payoff and profit for a butterfly spread using these options.
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