You are long an at-the-money straddle on a stock index.Which of the following statements is valid?

Question

Quizplus · Accepted Answer

A) If the index rises, both the call option and the put option of the straddle increase in value, leading to an overall increase in the value of the position.
B) If the index falls, both the call option and the put option of the straddle increase in value, leading to an overall increase in the value of the position.
C) If the volatility of the index rises, the option premiums increase, leading to an increase in the value of the straddle position.

You Are Long an At-The-Money Straddle on a Stock Index