Series 7 - General Securities Representative Exam

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What market outlook does an investor have if he buys a strangle?

He thinks the price of the underlying stock will either increase or decrease sharply; but is unsure of the direction
A
He thinks the price of the underlying stock will stay in a certain range, over a certain period of time
B
He has a definitive outlook for the price direction of the underlying asset and want to profit from this directional move
C
He thinks the price of the underlying stock will stay in a certain range and is looking to establish a long position later
D

Explanations

When an investor buys a strangle, he is expecting a sharp move in one direction, but is unsure if the stock will move up or down. In contrast, an investor sells a strangle when he expects the price to stay within a certain range over a certain period of time

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