The common stock of the avalon corporation has been trading, Ask an Expert

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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 3 months. The price of a 3-month put option with an exercise price of $40 is $3.40, and a call with the same expiration date and exercise price sells for $4.30. Suppose you write a strap (that is, you sell two calls and sell one put) and the stock price winds up to be $42 at contract expiration. What was your net profit on the strap?

A. $500

B. $700

C. $800

D. $600

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92418414

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