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, 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?

Multiple Choice

• $400

• $200

• $700

• $300