Chapter 06 · Section 6.1
Change of the profit/loss profile
How would it change the profit/loss profile of this spread if it were built with a long 105 call instead of a long 100 call?
d) Increase maximum loss if market falls.
No. The maximum loss if the market falls is equal to the net premiums paid for the position. Since the 105 call is cheaper than the 100 call, the net premium will be lower for the spread created using the 105.
e) a and c
f) b and d
a) Reduce the maximum profit.
b) Increase the maximum profit.
c) Decrease maximum loss if market falls.