A short straddle:
A)involves exercising two or more options simultaneously.
B)is the purchase of both a put and a call on the same underlying asset.
C)obtains its maximum profit when the underlying stock price is equal to the strike price.
D)involves writing a call on shares of stock you currently own.
E)is a highly bullish strategy.

Question

Quizplus · Accepted Answer

A short straddle involves simultaneously selling a call and a put option with the same strike price and expiration date. Its maximum profit is obtained when the underlying stock price is equal to the strike price, making it a neutral strategy. Therefore, the correct choice is C.

A Short Straddle