SIE practice questioneasyStraddles
An investor believes a stock will be highly volatile but is unsure of the direction. Which two-option strategy is most appropriate?
- ALong straddle✓ Correct answer
- BCovered call
- CShort put
- DBull call spread
Explanation
Why A — Long straddle
A long straddle involves buying a call and a put to profit from volatility regardless of direction. The other choices do not profit from both up and down movements.
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