You buy one Xerox June 60 call contract and one June 60 put contract. The call premium is $5 and the put premium is $3.
-Your strategy is called
A)a short straddle.
B)a long straddle.
C)a horizontal straddle.
D)a covered call.
E)none of the above.

Question

Quizplus · Accepted Answer

This is a long straddle strategy, where the buyer of the contracts is hoping for a significant price movement in either direction, as they have both the right to buy (call) and sell (put) the underlying asset at the same strike price. The cost of the premiums is the maximum potential loss for this strategy.

You Buy One Xerox June 60 Call Contract and One