What happens to the cost of a long straddle when volatility increases? Option: It increases, It remains unchanged, It decreases, It fluctuates unpredictably

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What happens to the cost of a long straddle when volatility increases?

It increases

It remains unchanged

It decreases

It fluctuates unpredictably

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How does volatility impact a long strangle option strategy?

Low volatility during the holding period is desirable.

High volatility at the time of execution is beneficial.

The strategy is unaffected by volatility changes.

Increasing volatility during the holding period is favorable.

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What happens to the profitability of a short straddle as the market moves significantly away from the strike price?

"Losses increase, potentially becoming unlimited"

"Profits remain constant"

"Profits increase exponentially"

"Losses are capped at the net premium received"

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What market conditions are generally favorable for implementing a short straddle strategy?

"An anticipated increase in implied volatility"

"Low market volatility and an expectation of the price remaining within a range"

"A market experiencing a strong upward or downward trend"

"High market volatility and an expectation of a large price swing"

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What is the key factor that determines the success or failure of a long straddle?

Volatility

Market direction

Stock price at expiry

Time decay

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What is a common scenario where traders might consider employing a short straddle strategy?

"During periods of high market uncertainty and anticipated volatility spikes"

"Around major events where volatility is expected to rise before the event and subside afterward"

"When a stock is in a strong uptrend and expected to continue rising"

"When a stock is expected to experience a significant price breakout"