SIE practice questionmediumStraddles
An investor expects high volatility but is unsure of direction. Which is the most appropriate options strategy?
- ABuy a protective put
- BSell a covered call
- CBuy a straddle✓ Correct answer
- DSell a naked call
Explanation
Why C — Buy a straddle
Straddles profit by large moves in either direction. Selling covered calls or buying puts prepares for different scenarios, not volatility.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Spot an error in this question or explanation? Tell us — we fix these fast.
Related Options questions
- A trader simultaneously buys a March 50 call at $7 and sells a March 55 call at $3. What's the maximum profit per share?
- If an option is out of the money, what does its premium consist of?
- The maximum gain in a debit put spread is calculated as:
- A call with a $45 strike and the underlying at $60 has what intrinsic value?
- A bear call spread’s maximum loss occurs if:
- When is a call seller 'assigned'?
- What is the breakeven point(s) for a long straddle with a $40 strike if each option is bought for $3?
- A protective put limits losses on a stock to: