Which option strategy is profitable when the volatility of the underlying share price is high?

Question

Quizplus · Accepted Answer

Long straddle involves buying both a call option and a put option of the same underlying stock, with the same expiration date and strike price. This strategy can be profitable when there is high volatility in the underlying stock price as it allows the trader to profit from large price swings in either direction. When the stock price moves significantly, one of the options will be in the money and the other will be out of the money, resulting in a net profit. However, this strategy can be risky and costly as it involves purchasing two options.

Which Option Strategy Is Profitable When the Volatility of the Underlying