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SIE practice questionmediumStraddles

A short straddle is profitable when:

  1. AThe underlying stock price remains stable✓ Correct answer
  2. BThe stock price moves significantly in either direction
  3. CVolatility increases after entry
  4. DInterest rates rise
Explanation

Why A — The underlying stock price remains stable

Short straddles profit if the stock is stable (premiums are not paid out on large moves). B and C describe long straddles; D is not relevant.

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