Amy bought a $50 May call and a $50 May put on the same underlying stock. This strategy is referred to as which one of the following?
A)bull spread
B)bear spread
C)parity play
D)short straddle
E)long straddle

Question

Quizplus · Accepted Answer

Amy's strategy is a long straddle, which involves buying a call and a put with the same strike price and expiration date. This strategy profits from significant moves in either direction, as the long call option will increase in value if the stock price goes up and the long put option will increase in value if the stock price goes down.

Amy Bought a $50 May Call and a $50 May