AppliedMultiple choice
You buy a straddle the day before earnings. The stock moves exactly as much as the options priced. What happens to your position the next morning?
- AIt profits, because any move at all is good for a long straddle
- BIt loses: implied volatility collapses on what is left
- CIt gains from rising implied volatility, because volatility always spikes after news
- DIt is unaffected, since the straddle is delta neutral
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