5. Consider the following option chain for a stock trading at $45.80 per share:
| CALLS | PUTS | |||
| BID | ASK | STRIKE | BID | ASK |
| 14.00 | 17.70 | 30 | 0.30 | 0.75 |
| 9.40 | 12.80 | 35 | 0.80 | 0.90 |
| 5.60 | 7.00 | 40 | 0.90 | 1.00 |
| 2.05 | 3.50 | 45 | 1.50 | 2.95 |
| 0.35 | 1.65 | 50 | 4.70 | 5.90 |
| 0.20 | 0.60 | 55 | 8.80 | 10.20 |
| 0.10 | 0.50 | 60 | 13.50 | 15.00 |
You are bullish on the stock. Find the value of each of the following spreads:
1. 45-50 bull put spread: $_______________
2. 40-45 bull put spread: $_______________
3. 40-45 bull call spread: $_______________
4. 45-50 bull call spread: $_______________
6. Refer to the information in the problem above. If the stock has a 50% chance of being priced at $47.50 or less by expiry, and a 20% chance of being priced at $50.00 or more by expiry, which option spread has the highest expected value, 1, 2, 3, or 4? What is its expected value?