You Hold a Straddle on a Stock That You Bought

question 23

Multiple Choice

You hold a straddle on a stock that you bought a month ago and that still has two months to expiry. Assume the options are European. An unexpected increase of $1 in the price of the stock

• A) Will increase the value of your straddle.
• B) Will decrease the value of your straddle.
• C) Will have no effect on the value of your straddle.
• D) Can increase, decrease, or leave unchanged the value of the straddle.

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