Exhibit 22.7
Use the Information Below for the Following Problem(S)
GE Corporation has a put option selling for $2.90 and a call option selling for $1.95, both with a strike price of $29.00.
-Refer to Exhibit 22.7.Which strategy is most appropriate for an investor who expects share prices to be volatile,but was inclined to be bullish?
A) protective put
B) covered call
C) long straddle
D) short straddle
E) long strap

Question

Quizplus · Accepted Answer

A long strap involves buying more calls than puts, which benefits from volatility and is bullish, as it profits more from upward price movements.

Exhibit 22.7 Use the Information Below for the Following Problem(S)