You are considering two option contracts with the same strike price. Ignoring costs, which one of the following combinations will increase the value of a firm if prices move either up or down?
A) Buying both a call and a put.
B) Both buying and selling a call.
C) Buying a call and selling a put.
D) Buying a put and selling a call.
E) Both selling a put and a call.

Question

Quizplus · Accepted Answer

Buying both a call and a put option, known as a straddle, increases the value of a firm if prices move significantly either up or down. This strategy profits from large price movements in either direction.

You Are Considering Two Option Contracts with the Same Strike