Harry says that Dudley thinks that he is using magic but harry really is just Pulling a prank. Thus option A is correct.
Harry and Dudley both are in the backyard of the house as Dudley thinks that Harry is doing some sort of magic but in actually he is just pulling a prank on Dudley.
As both of them are acting as if they don't understand each other. Harry is trying o play with Dudley by showing him fish flying from the jar.
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