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.

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Definitions:

EEG Signals

Electrical activity of the brain recorded from electrodes placed on the scalp, used to diagnose various neurological conditions.

Primary Motor Cortex

The brain region responsible for the initiation and control of voluntary movements, located in the frontal lobe.

Specific Movements

Targeted or deliberate muscle movements or actions that are designed to achieve a particular result or function.

CNS

Central Nervous System, comprising the brain and spinal cord, responsible for processing and sending out neural signals.