Thursday, November 24, 2011

What is a butterfly spread and why is it a debit spread?

I understand that a butterfly spread using call options is a debit spread. Why must it be a debit spread in order to be rational (i.e. no arbitrage). It seems that in order to be rational: the prem on earned on 2 calls at K2 must be less than the premium payed for calls at strike prices K1 and K2. Why is this?|||hey you dont have it set up so i can contact you bu this is the only way i can, ok so ur awnser for my question, i have online banking but idk what a transaction looks like, i have a number like this "00000000 **** 00000388 Dec 14"





I blocked some numbers cuz idk if they are important.





Is that the transaction number?

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