Which of the following option strategies will help him profit should his view be proven correct (assume all strategies described below are long only)?

An investor believes that the market is likely to stay where it is.

Which of the following option strategies will help him profit should his view be proven correct (assume all strategies described below are long only)?
A . Strangle
B . Collar
C . Butterfly spread
D . Straddle

View Answer

Answer: C

Explanation:

Only the butterfly spread has a payoff profile that benefits when prices do not move much. The collar benefits during declining markets, the straddle and the strangle benefit from sharp movements in the markets. Therefore Choice ‘c’ is the correct answer.