An Option Trader Will Acquire a Long Straddle If the Trader

question 101

True/False

An option trader will acquire a long straddle if the trader expects a share price to become much more volatile than the market expects.

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Definitions:

Safety Margin

The difference between the actual performance or capacity of a system and its expected or required performance, serving as a buffer for uncertainty.

Fixed Costs

Expenses that do not change with the level of production or sales over a short period, such as rent or salaries.

Unit Contribution Margin

The amount by which the selling price of a unit exceeds its variable cost, often used to assess the profitability of individual products.

Targeted Net Profit

The specific amount of net income that a company aims to achieve within a certain period as part of its financial goals.