If the investor anticipates that the price of stock
Will be stable, he or she may
A) sell a straddle
B) buy a straddle
C) buy a call
D) buy a put

Question

Quizplus · Accepted Answer

Selling a straddle involves simultaneously selling a call and a put with the same strike price and expiration date. It is a neutral strategy that profits from the premium received from selling the options as long as the price of the stock remains stable. If the price moves too far up or down, the investor may face losses, but this risk can be managed with proper risk management techniques. Buying a straddle or buying a call or put would not be the best choice in this scenario.

If the Investor Anticipates That the Price of Stock