Chapter 06 · Section 6.1
Premiums-2
PUTS
100 .60/share
110 3.70/share
120 10.80/share
Suppose that you wanted to construct a short butterfly spread using these options. How much net premium do you receive for this position on a per share basis?
a) 3
b) -1
c) 7.70
d) 400
e) +4
Calculate the difference between the premiums received for the short puts and the premium paid for the long puts.
This position is built by writing one put at a low exercise, buying two puts at a medium exercise and writing one put at a high exercise.