What is the purpose of a long strangle option strategy?
A) To anticipate very low volatility in the price of the underlying commodity
B) To anticipate moderately high volatility in the price of the underlying commodity
C) To anticipate moderate volatility in the price of the underlying commodity
D) To anticipate very high volatility in the price of the underlying commodity

Question

Quizplus · Accepted Answer

The purpose of a long strangle option strategy is to anticipate very high volatility in the price of the underlying commodity. This strategy involves buying a call option and a put option at the same time, with both options having the same expiration date but different strike prices. The hope is that the price of the underlying asset will fluctuate significantly, causing one of the options to be profitable while the other expires worthless. This strategy is often used by traders who believe that there will be a large price movement in the near future but are uncertain about the direction of the movement.

What Is the Purpose of a Long Strangle Option Strategy