Devon Energy, an E&P company has constructed a zero cost collar strategy last summer. They bought a put option on crude oil with a premium of $0.50 per barrel with a strike price of $50 per barrel and sold a call option at a strike price of $70 per barrel and the same premium. If crude oil is $80 per barrel at maturity of the hedge, how much do they make or lose on the option hedge per barrel and per contract? Remember that this is a zero cost collar hedge.

CHOOSE THE BEST ANSWER!

Question 50 options:

A)	They make $10 per barrel on the hedge.

B)	They make $9.50 per barrel on the hedge.

C)	They lose $9.50 per barrel on the hedge.

D)	They lose $10 per barrel on the hedge.