A straddle is the simultaneous purchase (or sale)of a put and call option with the same underlying asset,
A) Same exercise price, and expiration date.
B) Same exercise price but different expiration date.
C) Same expiration date but different exercise price.
D) Either choices b or c.
E) None of the above.

Question

Quizplus · Accepted Answer

A straddle involves buying both a put and call option with the same underlying asset, exercise price, and expiration date. This allows the holder of the straddle to profit from a significant move in the price of the underlying asset in either direction. Therefore, the correct choice for a straddle is option A, which has the same exercise price and expiration date. Choices B and C, where either the exercise price or expiration date differs, correspond to other option strategies such as strangles or spreads.

A Straddle Is the Simultaneous Purchase (Or Sale)of a Put