Explanation:
A strangle trading strategy is implemented by buying a European call and a European put option on the stock of a specific firm with the same expiration date but different strike prices.
Option A is incorrect because, in a straddle strategy, the investor buys a European call option and put options with the same strike price and expiration.
Option B is incorrect because a strip options trading strategy is implemented by purchasing a European call option and purchasing two European put options with the same strike price and expiry date.
Option C is incorrect. In a straps trading strategy, the investor purchase two European call options and one European put option with the same strike price and expiration date.
Ultimate access to all questions.
Q.99 A fund manager has realized that there is a great potential for profits in the options market without tying up much capital. To test the potential of options trading, he implemented a spread strategy by purchasing a 6-month European call with the strike price of USD 92 and a 6-month European put option with a strike price of USD 84 on the stock of XTR. Which of the following strategies is the fund manager most likely using?
A
Straddle strategy
B
Strip strategy
C
Strap strategy
D
Strangle strategy
No comments yet.