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The FTSE index is at 5 , 1 0 0 . A firm is short a straddle on the FTSE 1 0 0 struck at

The FTSE index is at

5, 100 .

A firm is short a straddle on the FTSE

100

struck at

5, 100

and long a

5, 000 / 5, 200

strangle. If volatility were to increase,

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