A Short Straddle

question 84

Multiple Choice

A short straddle:

• A)involves exercising two or more options simultaneously.
• B)is the purchase of both a put and a call on the same underlying asset.
• C)obtains its maximum profit when the underlying stock price is equal to the strike price.
• D)involves writing a call on shares of stock you currently own.
• E)is a highly bullish strategy.

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Definitions:

Market Value

The ongoing cost for buying or selling an asset or service within a market platform.

Call Option

A contractual financial agreement that provides the purchaser the option, without being compulsory, to acquire an asset at a predetermined price during a particular timeframe.

Conversion Premium

The extra amount a investor pays over the convertible security's current value to convert it into shares of stock.

Conversion Price

The conversion price is the predetermined price at which a convertible bond or preferred stock can be converted into common shares of the issuing company.