USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider the following information on put and call options for Citigroup

-Refer to Exhibit 16.4. A long straddle is an appropriate strategy if
A) an investor wishes to generate additional income.
B) an investor wished to insure against a decline in share values.
C) an investor expected share prices to be volatile.
D) an investor expected share prices to remain in a trading range.
E) an investor expected share prices to be volatile but was inclined to be bullish.

Question

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider the following information on put and call options for Citigroup
 
-Refer to Exhibit 16.4. A long straddle is an appropriate strategy if
A) an investor wishes to generate additional income. 
B) an investor wished to insure against a decline in share values. 
C) an investor expected share prices to be volatile. 
D) an investor expected share prices to remain in a trading range. 
E) an investor expected share prices to be volatile but was inclined to be bullish.

Quizplus · Accepted Answer

A long straddle strategy involves buying both a call option and a put option with the same strike price and expiration date. This strategy is most suitable when an investor expects share prices to be volatile, as it allows them to profit from large price movements regardless of the direction.