An investor can create a straddle position by doing the following:
A)Buy a stock and write a call option
B)Buy a stock and buy a call option
C)Buy a stock and buy a put option
D)Buy a call option and a put option with the same exercise price

Question

Quizplus · Accepted Answer

A straddle position involves buying both a call option and a put option with the same exercise price. This strategy is used when the investor expects the stock price to move significantly but is unsure in which direction. By owning both a call and a put option, the investor can profit from either an increase or a decrease in the stock price. Thus, the best choice is D.

An Investor Can Create a Straddle Position by Doing the Following