In expectation of increased price volatility,an investor purchased a call option and at the same time bought a put option,both with out-of-the-money exercise prices on the same underlying asset.The strategy is known as a:

Question

Quizplus · Accepted Answer

The strategy of purchasing both a call option and put option with out-of-the-money exercise prices is known as a long strangle. This is a popular strategy used by investors who anticipate increased price volatility but are unsure of the direction of the price movement. The investor can potentially profit from a large price movement in either direction, while limiting their potential losses to the premium paid for the options.

In Expectation of Increased Price Volatility,an Investor Purchased a Call