Explanation:
All of these options strategies are bets on volatility. A strip combines two puts and one call to form a bearish-leaning strategy. A strap combines two calls and one put for a bullish-leaning strategy. A straddle combines one put and one call at the same strike price, while a strangle combines one put and one call at different strike prices, which makes the strategy cheaper, albeit with even more volatility needed to yield a profit.
Ultimate access to all questions.
Question 7
Due to a global health pandemic, volatility in the markets has accelerated considerably. You want to use options to make a bet on volatility that is decidedly bearish. Which strategy should you pursue?
A
Straddle.
B
Strangle.
C
Strip.
D
Strap.
No comments yet.