Payoff range of a long 5 short 10 call spread
Question
A stock is at . You buy a call struck at and sell a call struck at with the same expiry. With the largest and the smallest possible payoff at expiry, compute .
Short answer
. The spread pays nothing below , rises one-for-one between and , and is capped at above, so , .
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Open the worked solutionLessons behind this question
- Market Model and Risk-Neutral Valuation
- Option Mechanics: Calls, Puts, Moneyness, Intrinsic Value, and Exchange vs. OTC Markets
- Option Trading Strategies: Spreads, Combinations, and Payoff Engineering
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