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?
e) a and c
Yes. The higher exercise call is cheaper so the net premium paid is lower than with the spread using the 100 exercise call. The maximum profit is reduced since the intrinsic value of the 105 call is lower than that of the 100 call.Continue
f) b and d
a) Reduce the maximum profit.
b) Increase the maximum profit.
c) Decrease maximum loss if market falls.
d) Increase maximum loss if market falls.