13) A friend comes to you and says “Pssst

Straddles are a good way to make money from the stock market and you can benefit from this strategy when you are expecting high volatility but not sure as to which direction. The volatility of a stock does not necessarily decrease after the stock price increase, sometimes the stock price becomes more volatile after prices rise and sometimes it is less, so there is no fixed relationship between rise in price and fall in the volatility in stock price. Also, when you are expecting the decrease in volatility you would not buy the straddle you will short it, you will write a call option and write a put option and expect that the strike price remains within the range and you gain the premium. In long straddle you buy a long call and long put and expect that the market moves sharply in any direction and you will benefit from this. Straddle are not always profitable when you expected high volatility and there was no volatility then you will have losses, besides there is cost for buying the call and put for creating the straddle strategy.