Question

You are convinced that a stock's price will move by at least 15% over the next 3 months. You are not sure which way the price will move, but you believe that the results of a patent hearing are definitely going to have a major effect on the stock price. You are somewhat more bearish than bullish however. Which one of the following options strategies best fits this scenario?
a. buy a strap.
b. buy a strip.
c. write a straddle.
d. buy a straddle.

Answer 1

Answer:

b. buy a strip.

Explanation:

The strip is the option strategy in which we can purchase two options and one call option at the similar strike price and the similar maturity time period. It should be considered at that case when there is high expectation in bearish as compared with the bullish.

Since in the question it is mentioned that there is more bearish than bullish so here the buy a strip would be relevant

hence, the option b is correct