Exhibit 13-9
USE THE FOLLOWING INFORMATION FOR THE NEXT QUESTION(S)
Consider the following information on put and call options for Bank of Montreal
$\begin{array}{ccc}
\text { Strike Price } & \text { Put Price } & \text { Call Price } \
\hline \$ 32.50 & \$ 2.85 & \$ 1.65
\end{array}$
-Refer to Exhibit 13-9. A long strap 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

Exhibit 13-9
USE THE FOLLOWING INFORMATION FOR THE NEXT QUESTION(S)
Consider the following information on put and call options for Bank of Montreal
 $\begin{array}{ccc}
\text { Strike Price } & \text { Put Price } & \text { Call Price } \
\hline \$ 32.50 & \$ 2.85 & \$ 1.65
\end{array}$
-Refer to Exhibit 13-9. A long strap 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 strap involves buying both a call and a put option with the same strike price and expiration date, but with more calls than puts. This strategy is used when an investor expects the underlying asset to be highly volatile and has a bullish bias, meaning they believe the price will move significantly, but expect it to move more likely upwards.