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.
Selling a straddle would generate total premium income of ________.

A) $300
B) $400
C) $500
D) $700

Selling A Straddle

A trading strategy involving the sale of both a put and a call option on the same asset, with the same strike price and expiration date, to profit from minimal movement in the asset's price.

Premium Income

Income earned by an insurer or an individual from selling insurance policies or options contracts.

Narrow Range

Refers to the situation where a stock, commodity, or market trades within a small price range over a specified period, indicating low volatility or consolidation phase in the market.