What is the purpose of a short straddle option strategy?
A) To anticipate lower volatility in the price of the underlying commodity
B) To anticipate moderately high volatility in the price of the underlying commodity
C) To anticipate increasing volatility in the price of the underlying commodity
D) To anticipate very high volatility in the price of the underlying commodity

Question

Quizplus · Accepted Answer

A short straddle option strategy involves selling both a call and a put option at the same strike price and expiration date, with the anticipation that the underlying commodity will have lower volatility and stay within a certain price range. This strategy profits from the collection of premiums from both options without having to bet on the direction of the underlying commodity. Therefore, the purpose of a short straddle option strategy is to anticipate lower volatility in the price of the underlying commodity, making option premiums more valuable.

What Is the Purpose of a Short Straddle Option Strategy