A portfolio consisting of one put option and one call option, both with the same exercise price, is called a straddle. A straddle is a good investment strategy for investors who don't know whether an asset's value is likely to go up or down, but think that the volatility of the asset will increase.

Question

Quizplus · Accepted Answer

A straddle allows investors to profit from a significant move in either direction, and is a common strategy for those predicting an increase in volatility.

A Portfolio Consisting of One Put Option and One Call