Strategies

(35) Long straddle

This strategy consists of buying a call option and a put option with the same strike price and expiration. The combination generally profits if the stock price moves sharply in either direction during the life of the options.

(37) Protective put

The protective put establishes a ‘floor’ price under which investor’s stock value cannot fall. If the stock keeps rising, the investor benefits from the upside gains. Yet no matter how low the stock might fall, the investor can exercise the put to liquidate the stock at the strike price.

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