A combination of one put and one call on the same stock with the same exercise price and date is known as a:
A)strip
B)straddle
C)strap
D)spread

Question

Quizplus · Accepted Answer

A combination of one put and one call on the same stock with the same exercise price and date is known as a straddle. This strategy is used by traders who anticipate a significant move in the underlying stock price, but are unsure which direction it will take. By simultaneously buying a call and put at the same strike price, the trader is betting on volatility, rather than the direction of the stock price movement.

A Combination of One Put and One Call on the Same