To truly gain from a straddle,an investor must have a better estimate of volatility than everyone else.

Question

Quizplus · Accepted Answer

Straddles involve buying both a call option and a put option with the same strike price and expiration date. The goal is to profit from a significant movement in either direction for the underlying asset. However, to make a successful straddle trade, an investor must have a more accurate estimate of the potential volatility of the asset than the rest of the market. Only if the actual volatility exceeds the estimated volatility will the straddle trade profit. Therefore, a better estimate of volatility than everyone else is essential for a straddle to truly gain.

To Truly Gain from a Straddle,an Investor Must Have a Better