How Can a Strap Trading Strategy Be Created

question 9

Multiple Choice

How can a strap trading strategy be created?

• A) Buy one call and one put with the same strike price and same expiration date
• B) Buy one call and one put with different strike prices and same expiration date
• C) Buy one call and two puts with the same strike price and expiration date
• D) Buy two calls and one put with the same strike price and expiration date

---

Definitions:

Deadweight Losses

The loss of economic efficiency that can occur when the equilibrium for a good or a service is not achieved, leading to a net loss in societal welfare.

Incentives

Motivational factors or mechanisms that encourage individuals or groups to behave in a certain way or to take specific actions.

Lump-Sum Taxes

Taxes that are the same amount for everyone, regardless of the taxpayer’s income level or ability to pay.

Marginal Tax Rates

The percentage of tax applied to the last dollar earned, indicating the fraction of any additional income that will be taken in taxes.