The given structure of the transaction in options is a butterfly spread. In a butterfly spread, investors take three different positions in the options market. If calls are used, the investor:

• purchases a European call option with the strike price of X1;
• buys another European call option with a higher strike price of X3; and lastly,
• sells two European calls with strike price X2, where $X2 = \frac{(X1 + X3)}{2}$

The expiration dates are identical for all the options.

Option A is incorrect. A bull spread involves buying a put/ a call with a lower strike price and selling a put/call with a higher strike.

Option B is incorrect. A bear spread is a bearish options strategy designed to take advantage of a moderate decline in the price of the underlying in the near term. A bear spread involves buying a put/a call at a higher strike price and selling the put/call at a lower strike price.

Option C is incorrect. A box spread is a strategy created from a bull using call options and a bear spread using put options. The strike price and time to maturity of both bull and bear spreads should be the same.