A straddle is a combination of a put option and a call option on the same asset with the same strike price. Which one of the following statements about a straddle is NOT true?
A) The owner of a straddle will receive a payoff if the price of the underlying asset is higher than the strike price at expiration.
B) The owner of a straddle will receive a payoff if the price of the underlying asset is lower than the strike price at expiration.
C) The owner of a straddle will never exercise the put and the call option at the same time.
D) The owner of a straddle will receive a higher payoff if the price of the underlying asset at expiration is near the strike price.
Correct Answer:
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