Six-month call options with strike prices of $35 and $40 cost $6 and $4, respectively. What is the maximum gain when a bull spread is created by trading a total of 200 options?
A. $100
B. $200
C. $300
D. $400
C
The bull spread involves buying 100 calls with strike $35 and selling 100 calls with strike price $40 . The cost is 6×100?4×100=$200 . The maximum payoff (when the stock price is greater than or equal to $40) is $500 . The maximum gain is therefore 500 ?200 = $300 .
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