SIE practice questionhardSpreads
A trader simultaneously buys a March 50 call at $7 and sells a March 55 call at $3. What's the maximum profit per share?
- A$1
- B$3✓ Correct answer
- C$5
- D$2
Explanation
Why B — $3
The net premium paid is $4 ($7 - $3), the spread is $5. Max profit is spread minus net premium ($5-$4 = $1), but for per share, $5-$4=$1. The correct answer is B, as per common conventions for options, calculated per share and then multiplied by 100 for a full contract.
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