TRUE or FALSE sentences. 

1. If you sell a straddle, your profit is highest when the stock price ends up at the strike price of the options at maturity (Recall that a long straddle implies buying a call and put option on a stock with the same exercise price and maturity).

2. In a covered call position, the maximum payoff at maturity is the strike price of the short call. (Recall that a covered call involves buying a stock and selling a call on that stock).

3. In a market where the alpha of all the assets is zero with reference to the Capital Asset Pricing Model, we shall find no evidence in support of anomalies like Price/Earnings ratio anomaly or Book/Market ratio anomaly.

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The detailed answer for the above question is provided below 1 True When holding a long straddle lon... View the full answer