Raoul Purchased Both a Call and a Put on 125,000

question 284

Multiple Choice

Raoul purchased both a call and a put on 125,000 bushels of soybeans. Both options have a strike price of 510 and a common expiration date. Soybean contracts are based on 5,000 bushels. The price of soybeans on the expiration date is 530. Ignore the costs of the options and all transaction costs. What is Raoul's profit or loss on these two option contracts?

• A) -$25,000
• B) -$12,500
• C) $0
• D) $12,500
• E) $25,000

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