You Own a Call Option and Put Option That Both

question 92

Multiple Choice

You own a call option and put option that both have the same exercise price of $50, and their respective prices are $4 and $3. The stock is currently trading at $60. Calculate the dollar return on this strategy.

• A) $1.00
• B) $2.00
• C) $3.00
• D) $4.00
• E) $5.00

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Definitions:

Variable Costs

Costs that vary in relation to a company's operational activities, like labor and material expenditures.

Fixed Costs

Fixed costs are business expenses that remain constant regardless of the level of production or business activity, such as rent, salaries, and insurance.

Initial Investment

The amount of money or capital put into purchasing assets or starting a project at its inception.