SIE practice questionhardOptions - Straddles
What does an investor expect when entering a long straddle options position?
- AA significant decrease in stock price only
- BStable prices with low volatility
- CA significant increase in stock price only
- DSignificant volatility, regardless of direction✓ Correct answer
Explanation
Why D — Significant volatility, regardless of direction
A long straddle profits from large moves up or down. Stable prices cause both options to lose value. Calls alone profit from increases; puts from decreases.
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