The Common Stock of the Avalon Corporation Has Been Trading

question 43

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.
-Suppose you write a strap and the stock price winds up to be $42 at contract expiration.What was your net profit on the strap?

• A) $200
• B) $300
• C) $700
• D) $400

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