Since the Value of a Straddle Position Can't Be Negative

question 101

True/False

Since the value of a straddle position can't be negative, then a straddle is a costless way of profiting from market movements.

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Definitions:

Variable Cost

Costs that vary in proportion to the level of production or business activity, such as materials and direct labor.

Fixed Costs

Expenses that do not change with the volume of production or sales, such as rent, salaries, and insurance premiums.

Relevant Range

The range of activity within which assumptions made about cost behavior are valid. Beyond this range, fixed and variable cost patterns may change.

Break-even Point

The level of sales or production at which total revenues equal total costs, resulting in neither profit nor loss.