SIE practice questionmediumStraddles
A short straddle is profitable when:
- AThe underlying stock price remains stable✓ Correct answer
- BThe stock price moves significantly in either direction
- CVolatility increases after entry
- 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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