You anticipate a recession with increased stock volatility and greater negative skewness in stock prices. Which of the following option positions would be most consistent with your view?
A) A straddle.
B) A strip.
C) A strap.
D) A vanilla put.

Question

Quizplus · Accepted Answer

A strip involves buying a put and two calls with the same strike price and expiration date. This strategy profits from increased volatility and a bearish move in the underlying asset, aligning with the anticipation of a recession and greater negative skewness in stock prices.

You Anticipate a Recession with Increased Stock Volatility and Greater