strangle

All of these combinations are bets that implied volatility will increase. A STRADDLE is long a call plus long a put, both at the same strike price (in my example, K = $20). A STRANGLE is also long call plus long put, but the options are out of the money; the strangle is less expensive but...

Learning objectives: Describe the use and explain the payoff functions of combination strategies. Questions: 728.1. The risk-free rate is 3.0% and the the stock price of Discovery Communications (ticker: DISCK) is $20.00. Peter purchases a straddle with six-month European at-the-money options...