Question

A customer buys 1 XYZ Dec 30 call at 7 and sells 1 XYZ Dec 40 call at 1. Two months later, if the customer closes the positions when the spread is trading at 9 points, the customer has

Answer 1

Gain of $300

Step-by-step explanation:

Based on the information given the investor have a debit spread and Since the investor paid a net premium of the amount of $600 which is calculated as : (7 − 1) in which the spread had widened to 9 which means the investor will have a profit or gain of the amount of $300 calculated as :(9 − 6) due to the spread .

Therefore the customer has a gain of the amount of $300 reason been that it is a Debit spreads and secondly Debit spread are often profitable.