Exhibit 13-10
USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT QUESTION(S)
GE Corporation has a put option selling for $2.90 and a call option selling for $1.95, both with a strike price of $29.00.
-Refer to Exhibit 13-10. Which strategy is most appropriate for an investor who expects stock prices to be volatile, but is inclined to be bullish?
A) protective put
B) covered call
C) long straddle
D) short straddle
E) long strap

Question

Quizplus · Accepted Answer

A long strap is the purchase of two call options. Thus the investor is bullish expecting stock prices to move up and the investor also expects the market to be volatile by buying call options.

Exhibit 13-10 USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT QUESTION(S)