You buy a call option on Summit Corp.with an exercise price of $40 and an expiration date in September and write a call option on Summit Corp.with an exercise price of $40 and an expiration date in October.This strategy is called a _________.
A) time spread
B) long straddle
C) short straddle
D) money spread

Question

Quizplus · Accepted Answer

This strategy involves buying and writing call options on the same underlying asset with different expiration dates and the same exercise price. As the question states, a call option is bought with a September expiration date and a call option is written with an October expiration date. This is called a time spread because the options have different durations. The goal is to profit from the difference in time decay between the two options.

You Buy a Call Option on Summit Corp