Due to technological and market developments, the price of Beta stock has become quite volatile. Given this, you decide to buy two one-month put option contracts and two one-month call option contracts on this stock with an exercise price of $15. You purchased the calls at a quoted price of $.40 and the puts at a price of $2.30. What will be your total profit on these positions if the stock price is $29 on the day the options expire?

Multiple Choice

• $1,360

• $1,890

• $2,260

  Correct

• $2,720

• $1,130

  Incorrect

Explanation

Total profit = 2(100)($.40 15 + 29) + 2(100)($2.30) Total profit = $2,260