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1)How can a strangle trading strategy be created? Group of answer choices Buy two calls and one put with the same strike price and expiration date Buy one call and one put with different strike prices and same expiration date Buy one call and two puts with the same strike price and expiration date Buy one call and one put with the same strike price and same expiration date 2
1)How can a strangle trading strategy be created?
Group of answer choices
Buy two calls and one put with the same strike price and expiration date
Buy one call and one put with different strike prices and same expiration date
Buy one call and two puts with the same strike price and expiration date
Buy one call and one put with the same strike price and same expiration date
2.Which of the following is true?
Group of answer choices
There is always some chance that an American call option on a stock will be exercised early
An American call option on a stock should never be exercised early
There is always some chance that an American call option on a stock will be exercised early when no dividends are expected
An American call option on a stock should never be exercised early when no dividends are expected
3. How can a strap trading strategy be created?
Group of answer choices
Buy one call and one put with the same strike price and same expiration date
Buy one call and two puts with the same strike price and expiration date
Buy two calls and one put with the same strike price and expiration date
Buy one call and one put with different strike prices and same expiration date
4. How can a strip trading strategy be created?
Group of answer choices
Buy one call and one put with different strike prices and same expiration date
Buy one call and two puts with the same strike price and expiration date
Buy one call and one put with the same strike price and same expiration date
Buy two calls and one put with the same strike price and expiration date
Expert Solution
1) Ans) Buy one call and one put with different strike prices and same expiration date
In strangle , investor expects stock to move wildly in one direction but is unsure as in which direction it will move. Thus to benefit from this movement , one will buy both call option and put option with different strike prices and same expiration date
2) Ans) An American call option on a stock should never be exercised early when no dividends are expected
3) Ans) Buy two calls and one put with the same strike price and expiration date
In strap also investor expects stock to move wildly in one direction but is unsure as in which direction it will move . However there is bullish bias .
4) Ans) Buy one call and two puts with the same strike price and expiration date
Strip is opposite of strap strategy, here investor expects stock to move wildly in one direction but is unsure as in which direction it will move . However there is bearish bias .
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