Joe believes that the volatility of a stock is higher than indicated by market prices for options
Question:
Joe believes that the volatility of a stock is higher than indicated by market prices for options on that stock. He wants to speculate on that belief by buying or selling at-the-money options.
Determine which of the following strategies would achieve Joe’s goal.
(A) Buy a strangle
(B) Buy a straddle
(C) Sell a straddle
(D) Buy a butterfly spread
(E) Sell a butterfly spread
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