A Straddle Is a Combination of a Put Option and a Call

question 90

Multiple Choice

A straddle is a combination of a put option and a call option on the same asset with the same strike price. Which one of the following statements about a straddle is NOT true?

• A) The owner of a straddle will receive a payoff if the price of the underlying asset is higher than the strike price at expiration.
• B) The owner of a straddle will receive a payoff if the price of the underlying asset is lower than the strike price at expiration.
• C) The owner of a straddle will never exercise the put and the call option at the same time.
• D) The owner of a straddle will receive a higher payoff if the price of the underlying asset at expiration is near the strike price.

---

Definitions:

Plasma

The liquid component of blood, in which blood cells are suspended, comprising about 55% of total blood volume.

Clumping Together

The process by which particles or objects gather or aggregate into a mass or group.

Blood Cells

Cells that circulate in the blood, integral for transporting oxygen, fighting infections, and performing other vital functions; include red blood cells, white blood cells, and platelets.

Allergic Reaction

An immune system response to a foreign substance that's not typically harmful to your body, such as pollen, bee venom, pet dander, or certain foods.