The Common Stock of the Avalon Corporation Has Been Trading

question 9

Multiple Choice

The common stock of the Avalon Corporation has been trading in a narrow range around $40 per share for months, and you believe it is going to stay in that range for the next three months. The price of a three-month put option with an exercise price of $40 is $3, and a call with the same expiration date and exercise price sells for $4.
-Selling a straddle would generate total premium income of _____.

• A) $300
• B) $400
• C) $500
• D) $700

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