Volatility of the underlying stock

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Reference no: EM131517029

The volatility of an underlying stock has been 30% per year last year. Suppose you believe the volatility of the underlying stock will be 20% per year from now until the expiration date, and all other investors believe the volatility of the underlying stock is 10% per year. Based on this information, what will you do? 1) Long Protective Put 2) Short Protective Put 3) Long Straddle 4) Short Straddle 5) Long Covered Call.

Reference no: EM131517029

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