You buy a call option and a put option on General Electric. Both the call option and the put option have the same exercise price and expiration date. This strategy is called a ________.
A) time spread
B) long straddle
C) short straddle
D) money spread

Question

Quizplus · Accepted Answer

A long straddle involves buying both a call and put option with the same exercise price and expiration date. This strategy is used when the investor anticipates a significant price movement in either direction but is uncertain which way the price will move. By owning both options, the investor profits from any significant increase or decrease in the price of the underlying asset. Time spread, short straddle, and money spread are not appropriate terms to describe this strategy.

You Buy a Call Option and a Put Option on General