Butterfly Spread Payoff - Quant Trader Interview Question
Difficulty: Medium
Category: Finance
Practice quant interview questions from top firms including Jane Street, Citadel, Two Sigma, DE Shaw, and other leading quantitative finance companies.
Topics: options, butterfly-spread, payoff, risk-management
Problem Description
You construct a long call butterfly spread with the following characteristics:
- Long 1 call option with a strike price of 95
- Short 2 call options with a strike price of 100
- Long 1 call option with a strike price of 105
What is the maximum possible profit for this butterfly spread, assuming all options are European options with the same expiration date and zero transaction costs? All options are on the same underlying asset.
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