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Information to answer next 2 questions. The common stock of the Avalon Corporation has been trading in a narrow range around $40 per share for
Information to answer next 2 questions. 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 S40 is $2.50, and a call with the same expiration date and exercise price sells for $3.50. 11. Writing a straddle (write put and write call with the same strike price) would generate total premium income of A. $300 B. $400 C. S500 D. $600 (2.5+3.5) = 6 x (100)=160o 12. Suppose you write a straddle (-write put and write call with the same strike price) and the stock price winds up to be $38 at contract expiration. What was your net profit on the straddle? A. $200 B. $300 C. $400 D. $600
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