What type of spread strategy is this

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Reference no: EM132038467

Consider the following spread strategy: Short John Deere June $150 call, price = $13.50, long John Deere July $150 call at price = $18.625.

a. What type of spread strategy is this?

b. In June at expiration of the short call, Deere is currently trading at $152 and the July call is trading at $19.50. We close our spread position in two ways: settle on the June $150 call and take an offsetting position on the July $150 call.

c. Evaluate the payoff on the spread assuming 100 share contracts if the conditions in (b) hold.

Draw a general payoff profile of this type of spread.

Reference no: EM132038467

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