A purchaser of a straddle:
A) believes that the underlying stock price will exhibit small volatility.
B) believes that the underlying stock price is highly volatile.
C) believes that the stock price will go up only a little.
D) believes that the stock price will go down only a little.

Question

Quizplus · Accepted Answer

A straddle involves purchasing both a call option and a put option on the same underlying asset with the same strike price and expiration date. This strategy is typically used when the purchaser believes that the underlying stock price will experience significant volatility, but is unsure of the direction of the price movement.

A Purchaser of a Straddle